Teesworks: loan facility of £350m set up to replace 'historic informal arrangements'

The monetary arrangements and loans around Teesworks have been hugely controversial.

The new loan facility of up to £350m has been set up for Teesworks, which is set to replace the project’s “historic informal arrangements” according to the Tees Valley Combined Authority.

TVCA’s Cabinet has approved the arrangement, with the funds set to come from the South Tees Development Corporation.

This new process is designed to strengthen the governance arrangements of the freeport site, which have previously been questioned in a variety of government reviews and internal reports.

The freeport, which covers the former Redcar steelworks site, was initially a 50-50 joint venture between public body South Tees Development Corporation (STDC) and businessmen, Chris Musgrave and Martin Corney.

A transfer of shares in November 2021 saw the businessmen take control of 90 per cent of Teesworks Ltd, the company vehicle for the scheme, which was supported by Lord Ben Houchen, who has been mayor since 2017.

More than £500m of taxpayers’ money has been spent, with Mr Musgrave and Mr Corney extracting at least £120m via dividends and other payments.

A Government review in January 2024 found “no evidence of illegality” but made 28 recommendations for improvements in governance and transparency with Teesworks and TVCA.

Last year, the Labour Government issued a Best Value Notice to the combined authority, requiring improvements in governance and value for money, instead of ordering a National Audit Office investigation into Teesworks as campaigners had hoped.

More recently, accountants EY could not sign off TVCA’s 2024-25 accounts, saying it uncovered “material misstatements” and “material inconsistencies”.

The combined authority said the new arrangement will establish clear repayment principles, monitoring arrangements and financial controls over immediate loans and future borrowing.

It added that the “new framework will replace historic informal arrangements with documented and enforceable agreements”.

Tory Mayor Lord Houchen said: "The transformation of Teesworks is creating jobs, attracting investment and laying the foundations for long-term economic growth across Teesside, Darlington and Hartlepool.

“As the project continues to develop, this ensures financial arrangements supporting that regeneration are robust, transparent and provide value for taxpayers."

"These agreements give greater clarity over how loans are managed and repaid, while providing the confidence needed to continue investing in the infrastructure and development that is helping to bring this site back to life."

TVCA said the arrangement had been approved by independent advisor Arlingclose, which confirmed the loan would be covered by the business rates retention scheme.

Labour Mayor of Middlesbrough Chris Cooke said: “Teesworks is one of the most significant regeneration projects in the country, and it’s vital that the financial arrangements supporting its continued development are strong, transparent and accountable.

“By formalising these loan agreements, we are putting in place a clear framework that protects public investment, provides certainty for future decision-making and supports the long-term success of the site.

“Independent assurance has demonstrated the strength of these arrangements, giving us confidence that regeneration can continue while delivering value for taxpayers across Tees Valley.”

The loan facility will still have to be agreed by the STDC board, which is chaired by David Smith, the former chief executive of the Energy Networks Association.