Vital £460m investment into UK rail could be derailed after Labour intervention

A vital £460 million train investment to boost North East England’s economy and create jobs could be derailed – thanks to wrangling within the Labour government.

Just two months ago, Prime Minister Sir hailed a mega £500m deal to build trains at Hitachi’s County Durham plant, boasting how his government had “helped secure a deal that will protect hundreds of jobs.”

Visiting the Newton Aycliffe factory in December, Starmer posed for photos with relieved staff telling them: “I made a promise to the workforce of this factory and today, I’m delivering on that promise.”

A further £460m investment in the Japanese firm’s same plant to build future trains for the same rail operators was also on the table – meaning a total cash boost to the North East of almost £1bn.

But that extra deal hinges on the approval of new routes by open-access operators Lumo and Hull Trains, both part of FirstGroup – and the Department for Transport (DfT) has opposed some of those expansion plans.

The Daily Express understands DfT ministers wrote to independent regulator and final bids decision-maker the Office of Rail and Road (ORR) opposing the majority of the new route plans over network capacity concerns and “abstraction of revenue” from rival rail operators.

But Martijn Gilbert, managing director of Lumo and Hull Trains, insists their expansion plans are about more than just better rail travel.

He said: “Our proposals aren’t just about improving services – they’re about supporting UK manufacturing and the communities that depend on it.

“By ordering new trains from Hitachi, we can safeguard jobs in Newton Aycliffe while delivering better services for passengers. This is a win-win for passengers, communities, and UK manufacturing.”

The contrast between December’s celebrations and the DfT’s current stance has raised some eyebrows.

While ministers were quick to celebrate the initial £500 million deal, the DfT’s subsequent opposition to the expansion plans risks undermining the jobs uplift it created.

One source close to the bids explained that while the initial £500m order provided a solid foundation for Hitachi, it was not a ‘slam dunk moment’ – with the second order being vital for long-term jobs certainty in the region.

They told us: “There are certainly mixed messages. The government talks about wanting growth but there is a £460m deal on the table. Hopefully objectivity will prevail.”

Explaining their stance a DfT spokesperson said: “The government is committed to working with the entire rail sector, including Hitachi, to support jobs and growth across the country.

“Which is why we helped to deliver a £500m deal to protect the Newton Aycliffe site and hundreds of jobs in the Northeast.

“We’re supportive of Open Access services which can encourage growth, improve connectivity and capacity and provide more choice for passengers.

“But these benefits must not come at the cost of performance, better services or better value for taxpayers.”

Central to the DfT’s opposition to the bids according to their letter sent to Gareth Clancy, head of licencing and access at the ORR on February 4, 2025, are “significant concerns over abstraction of revenue from contracted operators” and “risks to network performance.”

However, Mr Gilbert claims that far from causing capacity issues or revenue abstraction, Lumo and Hull Trains’ growth on the East Coast Main Line has not come at the expense of the franchise operator.

Despite Lumo adding 1.4 million journeys annually since its launch, LNER is now running with higher passenger numbers than pre- levels and continues to grow.

Open access operators like Lumo and Hull Trains make up approximately 1 per cent of the rail network.

One of Lumo’s bids seeking approval is for six daily return services between Rochdale and London Euston on the West Coast Main Line.

If approved, this would restore a direct link between the town and the capital for the first time in almost 25 years.

Lumo’s current all-electric service between London and Edinburgh offers fares as low as £20, providing a greener alternative to flights and car travel.

While Hull Trains has expanded its services from one to eight daily trains between Hull and London, boosting the local economy.

No date has yet been given for when the ORR will make its final decision and a spokesperson for Hitachi declined to comment.