The Department for Transport has deferred the decision to proceed with the Intercity Express fast train programme until the Government's spending review in October.
The Intercity Express Programme (IEP) would provide new trains for the East Coast and Great Western Main Lines, and is separate from the High Speed 2 proposal.
Agility Trains was made the preferred bidder for the contract to build the trains in February 2009.
Agility is a consortium comprising engineering group John Laing, Hitachi and Barclays Bank. It intended to construct a new factory creating 300 jobs to assemble the rolling stock.
Secretary of State for Transport Philip Hammond said: “IEP is a complex programme which has interdependencies with several other major rail projects, and as expenditure on rail projects will necessarily be re-assessed in the context of the spending review, it would be irresponsible to make a decision on IEP in isolation at this time.”
The decision to stall the programme until the October’s full Government spending review was made after the Department for Transport reviewed Sir Andrew Foster’s independent assessment of the value for money of the IEP. This review also assessed the value of any alternative projects which meet the IEP’s aims.
In February the previous Government deferred the contract until after the general election.
A spokesperson for Agility Trains said: “The IEP proposal provides a step-change in capacity with relatively minor expenditure on infrastructure, as well as the opportunity to bring a major manufacturing facility and state of the art technology to the UK.
“We have expressed our commitment to continue working with the Department for Transport to respond to the points in the report, and to find an affordable solution which meets the government’s objectives.”
When the Agility group was first announced as preferred bidder, the consortium said up to 12,500 jobs would be created or safeguarded by the programme, including up to 500 jobs created new train manufacturing facility.
Some factions of the rail and train-building industry were disappointed by the previous Government’s choice of contractor. The other frontline bidder, Bombardier in Derby, is the only company with train building facilities in the UK. Bombardier saw the IEP as a project to secure jobs and long-term future of its Derby operations.
Hitachi and other pro-Agility supporters said the new factory will improve competitiveness in UK train building. It would also provide the Japanese company with a foothold in Europe from which it could supply trains to other European markets, strengthening the train building sector.