Julia Mazza untangles some murky business dealings on Teesside.

I grew up in Middlesbrough. We weren’t poor – both our parents were teachers –  but anyone could see the deprivation around us. We went to a school in Ayresome Ward. In the winter freezes, girls in summer dresses and matted cardigans would plough through the snow drifts in plastic sandals.

One could imagine that times have changed. Yet Ayresome now has the highest rate of child poverty in England at 84%.

But this isn’t an article about poverty. It’s about how Lord Ben Houchen, Conservative Mayor of Tees Valley and Chair of Tees Valley Combined Authority (TVCA) and its subsidiary South Tees Development Corporation (STDC),  uses taxpayers’ money in a poverty-stricken region to enrich a coterie of four businessmen, led by residential developers Chris Musgrave and Martin Corney. 

Here are the edited highlights.

Origins

Musgrave and Corney are lead private partners in the Teesworks Ltd (TWL) public-private joint venture (JV) set up to regenerate former steelworks land near the mouth of the Tees, also renamed Teesworks. The 2,600-acre wasteland, closed since 2015, is the largest brownfield project in Europe.

TWL was launched in July 2020 with the private 50% share transferred for free to companies controlled by the businessmen. In November 2021, another 40% was gifted to the consortium, leaving the public STDC with only a 10% share.

How did the JV partners achieve exclusive control?  The official story is that in 2019 their DCS Industrial Ltd purchased a three-year lease option on 70 acres from Redcar Bulk Terminal (RBT) for £489,041.

Relinquishing the option would persuade RBT to drop their objection to the Compulsory Purchase Order (CPO) of the steelworks land from its Thai owners.

Able UK

Was there a shortage of other local companies that STDC could have co-operated with?

 No.  Take Able Group, established in 1966 with profits last year of £15.2mn and owner Peter Stephenson’s family worth £576mn this year, according to the Sunday Times UK Rich List.

According to documents obtained by Tees Valley Monitor,  Able’s proposal to develop a heavy lifting quay at South Bank Quay on the Teesworks site was rejected in 2020 on the grounds that they weren’t good for the money – even though KPMG, who did the due diligence checks, gave them a clean bill of financial health.

Instead of Able’s proposed private £130mn investment in the wind farm production infrastucture, TVCA paid GRAHAM for the construction, with a loan of £113mn from the new public National Infrastructure Bank. The debt is on favourable terms: 1.99% fixed interest over 50 years.

Able took their plan of a manufacturing hub for offshore wind farms to Humberside and established an agreement with South Korean firm SEAH, who signed the Final Investment Decision in July 2021.

As another door opened it soon closed however, when SEAH dropped their Humberside plans in favour of South Bank Quay to build their monopile manufacturing centre.

Able boss Stephenson told Hull Live, “We… find ourselves having to compete with what, in reality, is a taxpayer funded development on the River Tees.”

Friends With Benefits

The businessmen are residential property developers: Able UK has a history of production for the offshore windfarm sector. Yet the TWL consortium went on to profit from the project. 

TWL had an agreement to buy the SEAH land from TVCA for £1 an acre, totalling £96.79 + VAT, according to Land Registry data. They were also to pay the cost of its remediation (around £15m). But in leasing the land back to TVCA and then selling on the lease to an investment fund, TWL made a profit of around £60m.

No doubt the land at South Bank Quay will be exploited in the same way. TWL bought it for £1 an acre with a total bill of £13.56 + VAT.

A TWL subsidiary has been appointed to operate the quay.

TWL isn’t required to make any payments until the quay is operational. TVCA remains liable for debt, insurance and environmental matters.

PD Ports

PD Ports, founded in 1840, is a major local employer and owns the river’s port, Teesport.

 The company was keen to form a mutually beneficial relationship with the STDC.

Prior to the Compulsory  Purchase Order (CPO) of the Teesworks site, STDC had reached out to PD Ports over access concerns. A proposed roundabout to reach Teesworks land would be built partly on PD Ports territory. The latter company offered to gift STDC this sliver of land to help the authority clarify their access.

PD Ports also offered to examine with STDC the criss-cross of PD Ports’ access rights across Teesworks land, with a view to adjusting any that could obstruct new developments.

At the request of STDC, PD Ports did not lodge any objection to the CPO.

But after STDC won the CPO they claimed that PD Ports’ access rights were no longer valid. They took PD Ports to court to force them to acknowledge that they had no official access over Teesworks’ land.

STDC lost their legal action, which cost a likely £4.3mnof public money. That’s before the decision on PD Port’s legal costs which has yet to be made by the courts.

Musgrave and co haven’t lost a penny.

Making A Fortune

The Conservative government commissioned the Tees Valley Review (also known as the Gove Review) to examine governance at TVCA and STDC, and address allegations of corruption.  

According to the report: “To date [January 2024]  the JV partners have received circa £45m through TWL with a further £63m as cash in TWL. There has been no direct financial investment by the JV partners.”

As well as the land deal, the businessmen have made a fortune from the lucrative scrap metal on the Teesworks site, taking half of the total scrap earnings which had amounted by January this year according to the Review to some £100m.

The consortium has not contributed a penny to the project.

Meanwhile the cost to the public purse, reports the Review: “To date £560m of resources, including £246m in government grants and £257m borrowing.”

Favoured partners

There’s another side to the use of Musgrave and co.  The public purse has been deployed to provide low-cost loans intended for the public sector to assist TWL –  a 90% private enterprise company.

The deal has arguably made TWL more competitive than any other private company in the country.  

Preferential Treatment?

The preference for the four businessmen extends across the nascent 4,500-acre Teesside Freeport which includes Teesside International Airport as well as the Teesworks site. 

The businessmen have been gifted 50% of a joint venture to build a business centre there. They’ve invested nothing but TVCA have sunk £15mn into the project.  (19)

The huge public cost of remediation on such a scale is to be expected: the enrichment of four businessmen is not. 

But the Gove Review found no evidence of corruption.

Despite her pre-election rhetoric, Chancellor of the Exchequer Rachel Reeves is now silent about referring TWL to the National Audit Office. 

She could take another approach. Before Brexit, the UK was barred by the EU from favouring selected companies, but we still have the Competition and Markets Authority (CMA) which could be an alternative route to an investigation. 

Conveniently, the CMA has an office in Darlington.

Julia Mazza writes on North East issues.

Image: Transporter Bridge, Middlesbrough. https://www.flickr.com/photos/stephentierney/9997909524 Creator: Stephen Tierney . Attribution-NonCommercial 2.0 Generic. CC BY-NC 2.0