A late friend of mine was an engineer at the DfT working on alternative power. Hydrogen might be a solution for rural routes with few trains (such as the West Highland Line, the Far North Line, the Heart of Wales Line etc.). It's not a viable option for lines with at least one train per hour, it's so energy inefficient to use electricity to perform electrolysis and then convert that hydrogen back into electrical energy around - you lose 60-70%. Much more efficient to just send the electricity down a wire. That assumes of course that you're using green electricity to produce the hydrogen, 90% of hydrogen currently comes from burning fossil fuels. It'll have a place on remote routes, using surplus power when the wind is blowing strong but it's not a mainstream solution. Even in Germany it's only seen as a stopgap pending electrification. Look at the Swiss, they've electrified everything.
Mechanical signalling is still really common. In 2018 there were still four such boxes in London. The thing is that mechanical signalling rarely goes wrong. There are plenty of spare parts available and the skills required to maintain them comparatively straightforward.
Electrical insulation on the other hand degrades, such that plenty of kit from the 1970s now has "do not touch" signs all over it because any disturbance could blackout a wide area. A lot of 1990s kit (so when computerisation started to happen) is now obsolete and difficult to obtain spares. Despite the inefficiency of having one signaller every few miles, the capital expenditure required to resignal the line won't be recouped even with 100 years. As long as you don't want to make any changes, such as electrifying or altering track layouts then it's cheaper to leave things as they are.
It has got to the stage where Network Rail recently re-locked a mechanical signal box in Worcester, rather than replace with modern kit, that's how the economics stack up. Plymouth panel was installed in 1960, but because it will be a long long time before electric wires reach that far west it will long outlive its far younger brethren (Slough IECC lasted from the early 1990s to 2011).
It's interesting that you mention mechanical signalling, because despite what the government would have everyone believe, RMT and formerly NUR members have had decades of redundancies as the network has modernised in patches. With little protest against real progress. In fact Bob Crow once actually called for the closure of all level crossings.
Why does the railway cost so much?
Well after the various disasters of the late 1990s/early 2000s the railway has been transformed into the safest railway in Europe. That progress didn't come cheap.