Transport Minister Andrew Stephenson told MPs that £137 million will be used to design and deliver the upgrade to the Hope Valley line between the two cities, which are considered the worst connected in northern England.
The works in the Peak District include a loop around the main line connecting Sheffield to Manchester which would allow passenger trains to pass slow-moving freight wagons, allowing more trains to run and increasing the reliability of services.
The journey, which can take over an hour depending on the service despite being a 35 mile journey, is used by 4.2 million people every year.
Upgrading the line has been mooted for a number of years and concrete plans were first set out in 2018 but the scheme hit a number of delays.
Network Rail is now finalising detailed designs that will improve sections of the railway between Bamford station and Jaggers Lane Bridge in Hathersage, and around Dore & Totley station where a second platform will also be added. Work is expected to begin in 2022 and will be completed in 2023.
South Yorkshire mayor Dan Jarvis welcomed the news and said that ‘persistence has paid off’.
“This is a significant boost for our region. I’m pleased that our persistence has paid off, and that Ministers have finally listened to our calls to deliver long-awaited investment in this critical line between Sheffield and Manchester,” he said.
“I’ve pressed Ministers and officials from the Department for Transport and Network Rail for the past three years to ensure that we secure these much-needed improvements for passengers and businesses.
“For too long people in South Yorkshire, Derbyshire and Greater Manchester have been forced to endure endless delays, cancelled and unreliable services. The upgrade to this line – which connects 4.2 million people between Sheffield and Greater Manchester – will reduce these delays, improve reliability of trains and add a third direct train per hour.
“It’s overdue but welcome progress, however we need the Government to go much further if they are to level up South Yorkshire and the North.”
Rail Minister Chris Heaton-Harris said: “I am delighted to confirm £137 million for this scheme to remove bottlenecks on the Hope Valley line, transforming journeys between Sheffield and Manchester – two dynamic Northern Powerhouse cities.
“We are committed to levelling up infrastructure across the North, and these important upgrades will make a huge difference to passengers, providing the punctual, reliable services they deserve, as we build back better from Covid-19.”
Henri Murison, director of the Northern Powerhouse Partnership, said: "An efficient, well-connected rail network from east to west, north to south, is critical to building a productive Northern Powerhouse.
"This long-awaited investment will help to unlock economic growth and connectivity benefits in the near term for people and businesses in the Sheffield City Region and beyond, while we wait for the full programme of work to be delivered on Northern Powerhouse Rail between Sheffield and Manchester.
"To unleash the full economic potential of the North, we now need to see construction get underway on HS2 Eastern Leg from Leeds station down to Sheffield as the first stage and a Northern Powerhouse Rail route through Bradford, maximising the role of these cities to the North as a connected travel to work area.
"This will increase productivity by attracting workers from greater distances, as London has done for decades from the wider South East."
Network Rail will continue to look at ways to speed up the start of the work by carrying out signalling design work at the same time as the tendering process.
The body responsible for rail infrastructure will also liaise with train and freight operating companies to agree any changes to the network that may be required during construction.
Planning for the additional fast service through the Hope Valley scheme is being considered as part of work being carried out by the Manchester Recovery Taskforce (MRTF) which is looking at a how to improve performance in and around Manchester.
Earlier this month, a group of Labour MPs in Sheffield urged Transport Secretary Grant Shapps to retain the direct link between their city and Manchester Airport as part of his consultation.
The consultation, which ended on March 10, saw passengers presented with three different options for how the rail network in and around Manchester can be reconfigured from May 2022 to improve overall reliability.
Before the pandemic, during which passengers numbers have plummeted, congestion around Manchester was having a major knock-on impact on the rest of the North and Yorkshire.
The three options affect different routes and which routes have direct services to Manchester Oxford Road and Piccadilly stations, and Manchester Airport.
And in two of the scenarios, the Cleethorpes/Nottingham service via Sheffield to Liverpool is increased to a standard two trains per hour, meaning there is no longer a through service from Sheffield to Manchester Airport.
The Yorkshire Post revealed earlier this year that Transport for the North has abandoned its ambition for a new dual carriageway road between Sheffield and Manchester after two government-backed studies revealed it would be too costly and environmentally damaging.
It means plans for a twin bore Trans-Pennine tunnel beneath the Peak District first set out in 2016 by former Chancellor George Osborne to improve journeys on a route dubbed the "longest 35 miles in the UK" are now very unlikely to become reality.