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Hitachi's first train factory in Europe is to go ahead after a contract was awarded to a development company.

Merchant Place Developments will construct and fit out the plant at a Newton Aycliffe business park.

An archaeological exploration is being carried out on the site, but it is hoped that building work can begin at the end of the year.

Once fully operational it will employ 730 skilled staff, with a further 200 involved in the construction.

The decision to build a manufacturing plant was taken after Hitachi Rail Europe won the contract with the Department for Transport (DfT) to replace the ageing fleet of diesel-powered Intercity trains.

Alistair Dormer, from Hitachi Rail Europe, said: "By investing substantially in our train factory, we are creating employment opportunities for a large number of engineers and technicians in the North East, which has a strong tradition of engineering skills.

"We are keen to fill our order books, building trains here in the UK, for use in Britain and for exporting to continental Europe."