AEA Rail, located at Pride Park in Derby, is making almost a quarter of the workforce redundant by closing its test centre.

Managing director Stuart Hill said: "We are hoping to make the business more flexible so we can bring people in again - perhaps on contract jobs."

A consultation process is taking place with the employees and their unions.

The firm laid off another 100 workers earlier this year after a slump in profits.

"The signalling side of the business is doing well and we hope to transfer across to that side of the business," Mr Hill said.

"It is question of supply and demand in the sector and at the moment there is too much supply."

The firm also makes equipment that removes leaves on the line and monitors train and track performance.