The businessmen who hold a 90% share in the Teesworks regeneration project have made an offer to South Tees Development Corporation (STDC) to cut the period of their option on the land at the former steelworks site at Redcar by half.
They have told STDC and Tees Valley Combined Authority (TVCA) – both chaired by Tees Valley Mayor Lord Ben Houchen – that they are willing to reduce their option period from 30 years to 15, ending in December 2039, as a gesture of goodwill.
However, they have not offered to reduce their 90% stake in Teesworks,, which means they will continue to control the site during the intervening period, including the rate at which the land is developed for industry, as well as taking the lion’s share of profits, with STDC taking only 10% on behalf of the taxpayer.
The businessmen, Chris Mulgrave and Martin Carney – the joint venture (JV) partners – say they can halve the option period now because, after the work they have already done, they know much more about the site and its complex challenges and hold a “high level of confidence we can continue to deliver major developments within an accelerated timeframe.”
Musgrave and Corney have also offered:
- To provide a report to the STDC board every six months on the development status, marketing activity and expectations for the upcoming year; the STDC would be able to provide comment and recommendations;
- To produce a detailed summary of current contractual commitments for reinvestment at the site “to provide further assurances to wider government bodies”; and
- An assurance that they maintain a very keen interest in the skills/community agenda and are eager to ensure there is a significant drive to support local employment and community prosperity; further resources and additional financial support, they say “can be provided in this area”.
What happens now?
The JV partners’ offer, in the form of a letter to TVCA Group chief executive Julie Gilhespie following negotiations between the two sides, will be presented to the STDC board on Thursday (26 September) and the TVCA Cabinet the following day. The Cabinet is being recommended to note the outcome of the negotiations and approve the proposed changes to the terms of the Teesworks JV agreement.
This will form the response to two of the 28 recommendations of the independent Tees Valley Review and part of TVCA’s response to the Review as a whole to the government as required by former Levelling Up Secretary Michael Gove. The Review was set up by Gove following allegations of corruption in relation to Teesworks by Middlesbrough and Thornaby East MP Andy McDonald.
The Review did not find evidence of corruption but did find that “there are issues of governance and transparency that need to be addressed and a number of decisions taken by the bodies involved did not meet the standards expected when managing public funds”.
Breaking silence
The JV partners broke their silence over the Teesworks affair at a meeting with Gilhespie on 8 August, as reported by North East Bylines on 31 August. In their offer letter they go much further in justifying their position. They do so, they say, because: “The resource, business commitment and importance we have placed on Teesworks since its acquisition has been significantly understated publicly (as to our detriment we have not fully publicised our role and all achievements to date)”
The acquisition of the site, they repeat, was a direct result of their leverage when they agreed to forgo their options on parts of the land, adding that: “This land was…acquired with the JV contracts in place (i.e. this land never wholly belonged to the public sector who then ‘gave it away’)”.
While accepting that public funding to demolish the redundant steelworks and decontaminate parts of the site was fundamental in enabling regeneration activity, “the work of the private sector partners has ultimately created the value, whether securing tenants and negotiating commercial contracts or wider strategic planning of infrastructure and services, de-risking the site and making it a location where companies wish to invest”.
Economic impact
The JV partners also claim that a recently commissioned independent economic impact assessment – commissioned by the partners, presumably, but not included with the Cabinet papers – demonstrates that the returns to the public sector in a relatively short period are “vast”.
These, they say, include £79mn a year in business rates on completed developments spanning 44% of the site over the next five-to-ten years, with more to come if the remaining 56% of the site follows a similar development pattern.
Before Teesworks, Musgrave and Corney say, total annual business rates generated by Redcar & Cleveland Council amounted to £35mn (2023/24). Bringing development forward at Teesworks early would increase revenue to the council by 100% over the next five years. TVCA would also enjoy a growing revenue stream from its 50% share of Teesworks business rates.
Finally, the partners compare the rate of return they are achieving from public investment with that of the government. The £560mn of public investment in Teesworks, they say, has supported them in contractually securing £4.96bn of private investment – a ratio of about 9:1, compared with the government’s National Wealth Fund target of 3:1. If private investment in Teesworks rises to £10.4bn over the next 12-18 months as forecast, the partners say, the ratio will be 19:1.
“In short,” Musgrave and Corney conclude, “our delivery of the Teesworks project is already providing a rate of return well above government targets…it can therefore be clearly demonstrated the progress and development activity delivered by the private sector partners on Teesworks has secured significant financial returns to the public sector in a very short space of time.”
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