Tees Valley Mayor Lord Ben Houchen and his Cabinet are set to endorse a 20-year debt repayment plan under which their subsidiary, South Tees Development Corporation (STDC) will repay £421mn to Tees Valley Combined Authority (TVCA) by 2046.
The Cabinet will be recommended to approve the formalisation of loan agreements governing all existing loans advanced by TVCA to STDC by 2046 and future loans envisaged in the STDC’s Medium Term Financial Plan (MTFP), which could be as much as £350mn.
The Cabinet meeting on 31 July will be assured that the debt is sustainable and can be recovered, even in adverse financial conditions. The STDC Board meeting the previous day will receive a rather less confident report.
How they reached this position
Mayor Houchen set up STDC with himself as chair in 2017, with parliamentary approval. Since then, TVCA has advanced funding to STDC to facilitate the acquisition, remediation and redevelopment of the former SSI steelworks site, now known as Teesworks (a private company – see below), and to deliver associated infrastructure projects.
The original business case, according to a report to the Cabinet, was approved by government and was predicated on an agreement with government whereby business rates generated over a 25-year period (with 19 years remaining) are retained locally to fund the cost of upfront borrowing. The level of borrowing is said in the report to be consistent with the original business case.
Four loans were made – £46.5mn for the acquisition of the site, £112mn for the construction of the Quay, £235mn for preparation and infrastructure and £27mn for work which was the responsibility of the Teesworks private sector partners (the JV – joint venture – partners) who hold a 90% share in Teesworks but was carried out on their behalf by STDC. Of the £27mn, £20mn had been repaid by March this year with the remaining £7mn expected by the end of July.
None of these loans were formalised between TVCA and STDC. Interest terms were informally agreed with both parties and are reflected now in prior years’ accounts and in both parties’ MTFPs approved by their respective governing bodies in March 2026. The Cabinet will be asked on 31 July to approve both historic and future loans. Future loans will have to be within a £350mn limit already agreed.
Can STDC afford to pay?
Yes says a report to the Cabinet. It has had this issue looked into by its outside treasury advisers, Arlingclose, including stress tests on key downside scenarios. “This advice”, according to the Cabinet report, “ provides confidence that under the current MTFP assumptions and with the proposed repayment mechanism, STDC’s debt is sustainable and it can afford to repay its debt in full within the remaining period of the business rates retention arrangements, while maintaining financial resilience, even within a stressed scenario.”
STDC’s income profile, it adds: “is underpinned by a strong and increasingly mature occupier base, with revenues supported by operational assets, committed investment, high-quality counterparties [the JV partners], government-backed support mechanisms and long-term contractual arrangements. These investments provide a robust foundation for the future business rates base and associated commercial income streams.”
The STDC is not so sure. A report to its board on 30 July on its 4th quarter draft revenue and capital outturn 2025-26 – while not addressing the debt repayment plan directly – warns: “The principal financial risks facing the STDC Group remain the timing and confirmation of business rates income, the long-term affordability of borrowing costs, the collection of commercial income streams and the ongoing sustainability of the Group’s financial model as regeneration projects continue to progress.”
Teesworks – the JV partners
Teesworks is the company set up by STDC to regenerate and develop the Redcar site. Following two deals between the STDC (then chaired by Houchen) and two local private developers, Chris Musgrave and Martin Corney (the JV partners) the partners are now 90% shareholders in Teesworks with STDC holding the remaining 10%. The process by which this happened was reported in the Teesside Review in 2024 after it was set up by then Levelling Up Secretary Michael Gove following allegations of corruption by Middlesbrough MP Andy McDonald in the House of Commons. The Review did not find evidence of corruption but did conclude that standards expected when handling public funds had not been met. These findings were widely publicised at the time, including by North East Bylines,
The Teesworks accounts for 2024-25 to be presented to the STDC board on 30 July show turnover of £6.294mn, gross profit of £0.531mn, net profit [driven by non-trading income] of £7.263mn and EBIDTA (earnings before interest, depreciation, taxes and amortisation) of £1.269mn. They also show dividends paid of almost £30mn, as reported by North East Bylines on 1 July, of which the lion’s share goes to the JV partners as 90% shareholders.
Public to private transition
Martin Corney, on behalf of the directors, who include the STDC chief executive, John Barnes (who replaced former chief executive Julie Gilhespie in December 2024) as well as Chris Musgrave, says in the upbeat strategic report accompanying the accounts that “the performance of the company during the year ending 31 March 2025 has been steady but as with 2024 slightly hampered with delayed investment decisions by incoming occupiers. Principally due to geo-political events. However, milestones and performance ambitions in terms of land clearance, land availability and lease negotiations thus far has (sic) been strong and the board are confident this effort will realise significant new development and inward investment to the site in the following years.
“The Teesworks site continues to transition away from public investment used to kick start the re-purposing of the site, into a private sector led remediation and redevelopment phase. It should also be noted, notwithstanding the great progress to date, future activity of the regeneration of the site will be across a number of years and at significant cost that is forecast to be in the hundreds of millions of pounds. The ambition for the company is to continue to develop and regenerate Teesworks into a new sector-leading employment area where there is both a core centre of excellence for the low carbon industries of the future while also developing an area within the site for the digital and tech sector. Both sectors naturally complement each other and with significant enquiries in the pipeline the site will be host to a large number of new jobs and new investment and therefore improve the economic outlook for the region as a whole for the long-term. The success of the company is of course subject to a number of identified risks and a number of uncertainties which are monitored on a regular basis by the management team.”
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