Developers of UK regeneration project refuse to renegotiate ownership

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Developers at the controversial Teesworks regeneration project in north-east England have refused to renegotiate their 90 per cent ownership of the scheme.

A critical independent review of the project — which aims to rejuvenate the UK’s biggest brownfield site in Redcar — recommended that the local government attempt to “renegotiate a better settlement” with its private sector partners at the start of the year.

In August, lead developers Chris Musgrave and Martin Corney “reluctantly” agreed to renegotiate elements of the deal to “avoid any further negative publicity”, the FT reported.

But Musgrave and Corney have now said that they “see no reason” to vary the underlying ownership structure of the site’s development vehicle, which since 2021 has been 90 per cent in their hands, according to documents to be presented to the council on Friday.

They have, however, offered to water down the options they hold over the vast former steel site that forms the basis of the project. 

Teesworks has been subject to much controversy over the past two years owing to concerns over its value to the public purse. 

The former SSI site is being regenerated by a joint venture between the two local businessmen and a development corporation chaired by Lord Ben Houchen, the Conservative mayor of the Tees Valley. 

The arrangement started out under 50-50 ownership, but in 2021 the corporation allowed the developers a 90 per cent stake in the venture, which is called Teesworks Ltd.

That deal, struck in private, allowed the company to draw down any part of the site for a nominal sum, and was later justified as a way of transferring risk away from the public purse and encouraging private investment. Following the deal, profits tripled.

In January an independent review, commissioned by the last government, found there was “no evidence” the private partners had yet invested, while raising concerns about potential stranded public sector liabilities.

Among its 28 recommendations to the local bodies chaired by Houchen it said that, “if possible”, they should “renegotiate a better settlement for taxpayers under the [joint venture] agreement”.

In their formal response to the request, contained in papers that will go before council leaders on Friday, Musgrave and Corney ruled out any change in the balance of ownership.

They claim their involvement in the scheme had significantly accelerated regeneration and resulting external investment.

“The resource, business commitment and importance we have placed on Teesworks since its acquisition has been significantly understated publicly,” they said, adding that they had deferred other business interests and lost profit from other entities as a result. 

They said they were contractually committed to “tens of millions of pounds” in investment for remediation and servicing the site, which they said would generate £79mn in annual business rates for the local public sector over the next five to ten years.  

“The return to the private sector partners is a fraction of that to the public sector partners,” they said, adding that taxpayer returns were only at an early stage.

“We therefore see no reason to vary the [joint venture] agreement insofar as changing the settlement terms.”

Under the terms of the deal, Teesworks Ltd is able to draw down any part of the site over the next 30 years.

Musgrave and Corney said they would be willing to halve that period to 15 years and provide six-monthly progress updates to the development corporation’s board. 

Houchen pointed to a report commissioned by the developers, carried out by Colliers, as evidence that for every £1 in taxpayer money invested, £9 would be returned to the public purse. The report also states that just under £10.5bn from external investors is either committed or under legal negotiation.  

The developers’ position, part of the Tees Valley Combined Authority’s wider response to January’s review, is expected to be submitted to the Ministry of Housing, Communities and Local Government.