Middlesbrough and Hartlepool development corporations (DCs), the existence of both of which is under review by Tees Valley Mayor, Lord Ben Houchen, are now facing contrasting fates. The axe continues to hang over Middlesbrough DC but its Hartlepool counterpart looks likely to escape – for now.
South Tees Development Corporation (STDC) also looks set to stagger on under the weight of its massive debts.
Hartlepool’s reprieve will be due in part to a £1mn bail-out from Tees Valley Combined Authority (TVCA) and partly to being given more than £500,000 that Middlesbrough DC has left over.
The two DCs were set up by Houchen three years ago and provided with a £10mn grant each by TVCA to drive the regeneration of their respective town centres. Houchen chaired both for their first two years of existence until he was forced out by government pressure because of a potential conflict of interest with his position as chair of the TVCA cabinet.
He announced earlier this month that he was reviewing the future of the two DCs because the context had changed, as reported in North East Bylines on14 March. We now know from the agenda reports for the next meetings of the two DC boards that the review is to be completed by 30 June. The outcomes for both DCs already seem clear, however.
The gradual demise of Middlesbrough DC
Middlesbrough DC (MDC) is already showing signs of collapse. Two independent board members, Father Glyn Holland and Imran Anwar, have resigned and the interim head of planning, Julie Hurley, has left.
The board must have at least six members, who are appointed by Houchen. It still has seven (at the time of writing), including Tony Parkinson, the chair, and Chris Cooke, Mayor of Middlesbrough, who is vice-chair.
Julie Hurley was appointed only last June. The MDC is required to have a head of planning and it is being proposed that the post should be filled by Jonathan Spruce, director of infrastructure at TVCA. He will outsource the work to Nathaniel Lichfield and Partners at undisclosed cost.
Lichfields have offices around the country, including London, Leeds and Newcastle, but not Tees Valley.
MDC’s budget
MDC board members will be told in a report on 26 March that the proposed revenue budget for 2026/27 includes estimates of the costs of the Houchen’s review and meeting the ongoing operational costs of the assets currently held within MDC until 30 June, implying that MDC will be non-existent or inactive after that date.
“Steps have been taken to reduce these ongoing costs pending a decision on the future of the assets,” says the report. “As with any budget, estimates of those costs have been included which may, or may not, prove to be reliable. Pending the outcome of the review, it is estimated that £0.525m of the original £10m grant allocation will be remaining at the end of 2026/27.”
In the circumstances, adds the report, it is “not appropriate” to include the usually required medium-term financial plan with the budget, and “as MDC has no borrowing and a bank account that is not operational with all capital expenditure being funded by TVCA grant funding, a treasury management strategy is similarly not presented to the board for 2026/27.” No further meeting of the MDC board is scheduled.
A bail-out for Hartlepool
The outlook for Hartlepool Development Corporation (HDC) is not as bleak as for Middlesbrough. But there is still a problem: Middleton Grange shopping centre (MGSC).
The board is due to meet on 30 March, four days after Middlesbrough’s, when it will discuss HDC’s anticipated budget deficit for 2025/26 of £1.285mn including a net deficit of £144,000 on Middleton Grange. According to an official report there has been a significant budget deterioration over the 2025/26 financial year in spite of a slight improvement in the third quarter.
The deficit will become a £48,000 surplus as a result of various accounting expedients. The £10mn grant from TVCA will have been fully used up.
HDC’s budget report warns that the risks associated with MGSC are high (as North East Bylines reported on 11 February): “There remains a challenge around HDC’s on-going operating position, driven largely by MGSC performance. While funding streams address the 2026/27 shortfall, there is no confirmed recurrent funding beyond this period. There is a need for the board to prioritise the development of a regeneration plan for the town centre that seeks to ensure a sustainable financial position beyond 2026/27.”
It goes on: “MGSC faces significant market pressures, including tenant risk, falling retail demand, and rising service charge and utility costs. Further tenant losses or cost increases could widen the net deficit. The retail market remains uncertain nationally, and HDC is exposed to movements beyond its immediate control.
HDC’s budget
Nevertheless HDC, unlike MDC, is being recommended to approve a full-year budget for 2026/27, showing a deficit of £1.380mn of which £1.210mn is attributable to MGSC. This deficit is proposed to be offset by a £1mn contribution from TVCA, £48,000 carried forward from 2025/26 as a result of the accounting expedients referred to above and whatever more is necessary from the £525,000 Middlesbrough leftovers it is to be given.
South Tees: business rates
South Tees Development Corporation (STDC) dates from the early days of TVCA, having been set up by Houchen in 2017 with the main aim of regenerating the brownfield Teesworks site, a mammoth task.
It is beset by multiple problems, identified by the independent Tees Valley Review of 2023/24 and widely reported by North East Bylines, Private Eye and others. Many stem from its disastrous joint venture Teesworks partnership with two local businessmen, Chris Musgrave and Martin Corney.
Nevertheless, it seems set to carry on. When the board meets on 26 March it will be recommended, among other things, to approve a medium-term financial plan and a capital programme, both as far ahead as 2030/31.
STDC is forecast to have a healthy financial future if it can get through the next two years. But everything depends on its income from business rates paid by new industries setting up on the Teesworks site. As its budget report puts it, the medium term sustainability of its financial model “is based upon raising business rates from inward investment on the Teesworks site as the buildings occupied by businesses become fitted out for operations.
“There is inevitably a lag between STDC historically investing in remediation of the land, the site preparation and infrastructure and the associated costs of borrowing for funding these, and the JV exercising their right of transfer of the land for the inward investor to set up the business and for it to fit out the buildings which is the point at which business rates income is raised but also starts to flow through.”
The JV referred to is Teesworks, which is 90% owned by the businessmen Musgrave and Corney, who thus have significant control over STDC’s future. That proviso hangs over all the financial planning outlined below.
Debts and reserves
STDC is expected to have an “underlying need to borrow” £594.4mn to finance its capital spending by the end of 2026/27, which is an increase of £8.1mn over the coming year. This gives rise to anticipated £14.6mn interest to be paid in 2026/27, an increase of £6.9mn on the current year. After taking account of a net operating surplus of £9.79mn, STDC will have to raid its reserves to the tune of £4.8mn, running them down to £11.1mn.
STDC’s borrowings come from TVCA, its parent body, and the UK Investment Bank.
In spite of this debt burden, however, the medium-term financial plan assumes that by continuing to use its reserves the STDC will be able to set a balanced budget every year to 2030/31. The key significant risk to this projection is the level of business rates income [from industry setting up on the Teesworks site], which is STDC’s primary source of revenue income and subject to the JV proviso mentioned above.
If all goes as planned, business rates are forecast to start rising sharply in 2027/28, increasing from £9.7mn to £40.3mn by 2030/31. This would enable annual borrowing costs of £20.2mn by the end of the period to be met while reserves rise from a low point of £2.9mn at the end of 2028/29 – likely to be a critical year for STDC – to £35.8mn two years later.
There are other risks too – interest rate rises and issues that remain to be concluded from the 2023/24 and 2024/25 accounts, which are still not signed off following audit, may affect future years.
