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More than £650mn of state support has so far been provided to the controversial Teesworks regeneration project overseen by Conservative mayor Ben Houchen, according to a Financial Times analysis.
The figures underline the extent to which public money has underpinned the push to revive the former steelworks in Redcar, north-east England, even after private sector developers were brought in to drive investment.
The sum extended to the UK’s biggest brownfield site includes a sharp rise in local taxpayer liabilities and national tax breaks in the past three years.
Teesworks is a flagship project for the governing Conservatives in one of their critical electoral battlegrounds, where Houchen has led the way in seizing traditional Labour votes over recent years.
It is intended to replace thousands of former industrial jobs with opportunities from green energy employers.
But the six-year-old project has been plagued by questions over a decision taken by a public sector body chaired by Houchen in 2021 to hand 90 per cent of the shares in Teesworks Ltd to local businessmen for free.
The company was set up to develop the site by South Tees Development Corporation, which retained a 10 per cent ownership after the share transfer to entities controlled by Chris Musgrave and Martin Corney. STDC itself launched in 2017 to oversee the site’s regeneration.
A government inquiry into the governance of the Teesworks project, including the financial deals underpinning it, was launched in May and is expected to report back this month.
Houchen, who is also a peer, has said the purpose of the Teesworks Ltd share transfer in 2021 was to reduce the burden on taxpayers to fund the site’s regeneration.
But the FT analysis of published accounts shows that taxpayers have remained on the hook for increasing amounts of state support to STDC in recent years, including through public sector loans.
During the same period, Teesworks Ltd appears to have made only minimal investments, suggesting the taxpayer has carried most of the burden of the regeneration.
In May, Houchen said the two private developers had made investments of £168mn. The STDC has since said the figure was money due to be spent by the developers via Teesworks Ltd and comprised future “commitments”.
The FT has only been able to establish a single £15mn investment to date as part of a land transaction.
Teesworks Ltd, which holds purchase options across the entire site, last year agreed to buy land from an STDC subsidiary for the wind farm factory SeAH. Five million pounds were paid in 2022-23 with the rest not due for two years.
Teesworks Ltd said Musgrave and Corney’s companies “were committing tens of millions of pounds to remediate and service large parcels of land”.
The company added that this investment was moving forward “as the government-funded demolition on site is completed, redundant structures removed and the land has now been cleared to enable development”.
There had been “a huge amount of work behind the scenes”, it said, “preparing the site for development and securing new tenants who are providing more than £2bn of inward investment”.
“These actions have been complex and difficult but were essential to bring the Teesworks site back to life,” Teesworks Ltd added.
The developers have earned at least £45mn from sales of scrap from the site, according to analysis by the FT earlier this year. Neither Teesworks Ltd nor the STDC denied reporting by the magazine Private Eye that the developers had also made £75mn through the sale of land.
At the same time, state support and liabilities have risen significantly.
Since 2020, there has been a sharp rise in loans to the STDC from the Tees Valley Combined Authority, the group of five local councils also chaired by Houchen.
The loans totalled £206mn as of March 2023, up from £11mn in March 2020.
Teesworks Ltd said it had committed to ultimately repay an element of that borrowing, a £107mn loan from the UK Infrastructure Bank, for which the TVCA is legally the guarantor.
The STDC said debt finance “was always intended” to supplement grant funding for the project and that the rise was “as expected and in line with the operational plans on site”.
It said the debt would be funded by half of the proceeds from business rates at the Teesworks site, which the STDC estimated would total £31mn per year based on projects signed.
Central government also provided a landfill tax break to Teesworks earlier this year after lobbying by Houchen. The tax break is estimated by the STDC to be worth more than £250mn.
An STDC spokesman said that the tax break applied to sites across the country, not just Teesworks.
Central government has also provided another £246mn in grants to the project since 2017.
Teesworks will benefit from further tax breaks after it was granted freeport status by then-prime minister Boris Johnson’s government in 2021.
The precise value of the benefit is unclear, but the Office for Budget Responsibility forecasts that all eight freeports nationally will cost the Treasury £75mn a year by the mid-2020s.
The Treasury, Department for Levelling Up, Housing and Communities, and the Department for Business and Trade did not comment.
Additional reporting by Robert Smith in London