Tokyo: Japanese high-tech giant Hitachi said on 9 June that a multi-billion-dollar deal in Britain to build railway cars could be partially cancelled due to a spending squeeze by a new government in London.
A Hitachi spokesman said the company is waiting for Britain’s decision after a review of the project, which the company expects to receive in a matter of days.
“It’s possible that there may be changes in the British transport ministry’s plans,” the official said. “But I don’t think that our deal will be completely annulled because it’s about replacing decrepit railway cars,” he added.
Hitachi, a sprawling conglomerate that builds everything from auto parts to consumer electronics to health care equipment, is working with property developer John Laing and investment fund Barclays Private Equity on the deal.
The British government last year chose the Japanese company to spearhead the project, originally to be confirmed in March, that would replace two ageing fleets linking London with the northern and western parts of the country.
But negotiations for the one-trillion-yen ($11 billion) deal for 1,400 hybrid railway cars froze after a new government was elected in Britain last month, making public spending cuts its top priority.
Britain has pledged it will slash spending faster to keep its top credit rating after Fitch Ratings warned Tuesday that the country faces a “formidable” fiscal challenge.
Shares of Hitachi slumped seven percent on Monday when speculation of the deal’s cancellation emerged. Shares ended down 2.6% at 340 yen.