CHANCELLOR George Osborne tonight confirmed that plans to bring a high-speed train manufacturing plant to County Durham were on track.

Mr Osborne's comments, made during a visit to Japan, came after concerns were raised last month that the plans for the factory in Newton Aycliffe could be in jeopardy.

Transport Secretary Philip Hammond announced in March that the Hitachi-led Agility Trains consortium was the Government's chosen bidder for the Intercity Express Programme.

Reports of possible problems surfaced after a delay in the Government and Agility Trains consortium signing the train building contract, which was expected to be completed by the end of 2011.

Hitachi had immediately denied any threat to the programme and said it expected to finalise the £4.5bn deal in the first half of 2012.

Today the Government said it hopes to reach "financial close" on the contract within weeks.

And speaking on board a Hitachi-built Shinkansen bullet train in Tokyo, Mr Osborne confirmed that construction of the factory is due to start later this year and the first trains due to roll off the production line at Newton Aycliffe as planned in 2016.

He said: "I am here in Japan seeing for myself the technology that is behind the new trains that will be built in Britain.

"The opening of the new factory that will build them with the investment and jobs it will bring is good news for people in the North East and good news for people using our railways.

"It is also good news for the wider economy, and evidence of a new, more balanced economy in Britain that will help deliver sustainable growth in the years to come."

The campaign to bring train building back to the North-East was led by Sedgefield Labour MP Phil Wilson.

Last night he said: "This is further confirmation of the Government's commitment to get Hitachi trains to come to Newton Aycliffe, providing massive investment and jobs in the area badly needed at a time when unemployment has risen. I congratulate the Government on going ahead with this initiative and the previous government who's idea it was."

The new facility will employ at least 500 skilled workers, with a further 200 during construction.

The consortium will build at least 530 rail carriages, bringing faster, more reliable journeys - and 11,000 extra seats - on key inter-city routes.

Hitachi will base the train design on Japan's Shinkansen bullet train and the new High Speed One fleet that operates from St Pancras station in London.

The first Newton Aycliffe built train is expected to enter passenger service in 2017.