Percy and the Signal is the seventh episode ever made in Season 2.
One morning, Percy is being cheeky to Gordon by telling him that is train is ready, but then showing him a line of dirty trucks. Next, he tricks James into staying in the shed, saying that the Fat Controller is away for a week, James quickly moves and goes to look for Percy.
When the Fat Controller comes back, he is cross with both James and Percy for causing so much trouble. But the very next day, Percy is still being cheeky. Gordon and James decide to get back at him and talk about "backing signals". Percy believes that they are talking about a real type of signal and claims to know all about them. Percy is worried, but feels better after he sets off with his trucks.
When Percy comes to a signal, the signal's arm moves up instead of down. Percy thinks that it is a backing signal, so he reverses until his driver stops him. Percy tells his driver what Gordon and James told him. His driver laughs and explains. Percy then tries to leave before anyone could see him, but it is too late; Gordon saw everything. That night, the big engines talk about signals. They think it is very funny, but Percy thinks they are being very silly.
- When Gordon says "James and I had just been speaking about signals at the junction", part of James' face is coming away from his somebox.