A PROPOSED rail upgrade that could help bolster the case for the region's biggest port to be expanded with the creation of 5,500 jobs has been dealt a blow after failing to secure Government funding.

Plans for improvement of the line from Teesport to the East Coast Main Line were overlooked by the Department for Transport (DfT) yesterday in its allocation of the Transport Innovation Fund.

In a report from the DfT, the scheme was judged as being not sufficiently developed to be assessed.

However, Teesport's owner, PD Ports, said they were encouraged by a statement from the Secretary of State for Transport, Douglas Alexander, which urged that planning work on the project continued, and said the project "fitted with our (the DfT's) strategic objectives".

The upgrade is seen as an important part of £300m proposals from PD to build a container terminal on the Tees, which would bring in goods directly from the Far East.

If plans are approved, the port would create thousands of jobs, and save about 70 million lorry miles each year.

The DfT announced in June that it was considering assigning money from the Transport Innovation Fund to part-fund the project, which would allow a larger generation of sea containers to be transported to Teesport by rail.

But despite yesterday's setback, PD said it welcomed the DfT's report, which hailed Teesport as being a "key element" of the collaboration between Network Rail and The Northern Way on its W10 Strategy, which works to improve routes to markets for major Northern ports

Martyn Pellew, PD Ports' development director, said he remained hopeful that funding would yet be granted.

He said: "It is obviously a little disappointing that the Government have not yet allocated funding for the upgrade.

"But it is most encouraging that our scheme has been specifically identified in the Secretary of State's statement.

"Further improving our use of the rail network is not only essential for existing businesses in the North, it will also help Teesport and the North-East region to attract new inward investors.

"It will help shift freight from road to rail, in line with the nationwide environmental objectives that we firmly believe can be achieved by investing in better port and cargo handling facilities at Teesport."

The Transport Innovation Fund was introduced by the DfT to directly support schemes that would deliver significant productivity benefits at a national level, help tackle congestion and support international trade and competitiveness.

The Northern Echo is supporting Teesport's plans for expansion through the Support Our Port campaign.

Shadow transport secretary Chris Grayling said: "Given the growing number of lorries travelling from the South of England to the North and the mounting problem of congestion on our motorways, I am very surprised indeed that the Government isn't taking seriously ways of encouraging shipping companies to use ports in the north of England instead."