‘Brexit to blame if North firm loses Metro contract’
A CONTRACT which could have safeguarded hundreds of North East jobs may have been lost after the Japanese Government told companies to factor a “Brexit risk premium” into bids for work in the UK, it has been claimed.
A massive political row has broken out around the £500m contract to build and maintain new trains for the Tyne and Wear Metro.
Reports – as yet unconfirmed – emerged earlier this week that a bid from Hitachi, which has a train building plant at Newton Aycliffe, County Durham, had missed out on the contract, despite being one of three firms left in the bidding for the work.
Metro operator Nexus insisted the contract process was ongoing and no decision had been made, but Sedgefield MP
Phil Wilson – whose constituency includes the Hitachi plant – said that “if true” the decision was “outrageous”.
Tees Valley Mayor Ben Houchen went further, describing the reported decision as “appalling” and writing to Nexus calling for the contract process to be halted “before the wrong decision is announced”. That letter brought a furious response from Nexus bosses, who said that such a move would be illegal and “unfair to taxpayers”. And as the debate descended into a series of attacks between Labour and Conservative politicians, two North East council leaders have blamed the reported decision on Brexit.
The Japanese Government has warned on a number of occasions that Brexit would hurt firms from the country that have set up in the UK – many of whom are in the North East.
The UK’s departure from the European Union has worried many firms with bases in Britain because of potential delays at borders, the fluctuating exchange rate between the pound and other currencies, and the potential for new regulatory barriers. And the row over the Metro contract deepened yesterday, with Newcastle City Council leader Nick Forbes tweeting: “I think this has only happened because of the Prime Minister’s cavalier approach to Brexit negotiations, and subsequent warnings from the Japanese Government to Japanese companies to build a Brexit risk premium into any tender costs for public procurement.”
That comment echoed earlier tweets from Gateshead Council leader Martin Gannon to Mr Houchen saying: “People of the Tees Valley and the North East. Given that the issue is entirely related to the
I think this has happened because of the Prime Minister’s cavalier approach to Brexit negotiations Nick Forbes
bidder’s assessment of the risks associated with Brexit, perhaps Mr Houchen should consider speaking to his own Government and the Prime Minister.”
In 2016, Hitachi chairman Hiroaki Nakanishi warned that the “cold economic reality of Brexit” would mean jobs being lost and investment being held back.
Hitachi’s multi-millionpound plant, which was opened in 2015, was the largest inward investment in the North East since the opening of the Nissan plant in Sunderland, but bosses have warned that it needs more work if it is to stay open in the long term.
In July, Hitachi won a £400m contract to build trains for East Midlands Railway – ahead of rivals Bombardier, which is based in the Midlands – but says it still needs at least one more major piece of work to safeguard its future.
Nexus has secured Government grant funding of £337m towards the projected £362m cost of designing and building a new Metro train fleet and a new train maintenance depot.
The maintenance element of the contract pushes its value to around £500m.
The new fleet, expected to boast features such as air conditioning and Wi-Fi, should start arriving by the end of 2021, with all of the network’s existing stock of decades-old trains expected to have been replaced by 2024.
Procurement rules mean Nexus is not legally able to select Hitachi purely on the grounds of it being local, though it can take environmental matters into account, which could potentially help bidders with factories that are closer to Tyne and Wear.
The Chronicle has contacted Hitachi, Mr Houchen, the Department for Exiting the European Union and the Department for Transport for comment.