Teesworks Q&A: What’s happened so far as investigation underway
The Teesworks investigation is now well underway and the report is expected in the summer.
While we await the outcome, we thought it’d be a good opportunity to look back on the saga so far. We’ll cover how Teesworks was set up in the first place, why it’s proven controversial and the latest on the investigation.
It’s become a divisive political issue on Teesside, especially after Labour[1] Middlesbrough[2] MP Andy McDonald[3] claimed there was “industrial-scale corruption” at the site. However, Tory Tees Valley Mayor Ben Houchen has called the MP a coward and dared him to repeat those claims outside of parliament where he would not be protected by parliamentary privilege against being sued for defamation.
The Teesworks scheme is key to the region as it aims to regenerate a 4,500-acre site on the south of the River Tees by attracting businesses and 20,000 jobs. There is a focus on clean energy, with projects already secured in the low-carbon and offshore sectors including SeAH Wind and Circular Fuels.
How was Teesworks set up in the first place?
In 2015, the Redcar[5] Steelworks went into liquidation with the loss of thousands of jobs. The following year, the government announced that it would establish the South Tees Development Corporation.
The land at the former Steelworks then became integral to plans by the STDC to redevelop the site. However, this meant the STDC had to negotiate with Sahaviriya Steel Industries (SSI) and three Thai banks, as the banks were owed around £800m because they held the former steelworks site.
A deal in principle to buy the land was struck in May 2018 but this didn’t amount to anything.
Delegations, which included Middlesbrough chairman Steve Gibson[6] who was vice-chair of the STDC at the time, flew back and forth between the UK and Thailand to try and broker or deal. When it became clear that wasn’t going to happen, the STDC applied for a compulsory purchase order (CPO), which would have allowed it to take over the site without the banks’ permission.
However, Mr Houchen said the STDC was likely to lose the CPO, which is when developers Chris Musgrave and Martin Corney swept in, according to the mayor. Their company DCS Industrial Limited had signed a three-year lease for a 70-acre site on the Redcar Bulk Terminal (RBT).
The SSI agreed to stop trying to block the CPO in return for the RBT site. For brokering this deal, Mr Corney and Mr Musgrave were brought in as development partners on the Teesworks scheme.
There was no public tender process to acquire shares in Teesworks, however, Mr Houchen said the scheme would never have happened without Mr Corney and Mr Musgrave, which is why they became the development partners.
In March 2020, the TVCA Cabinet signed off on the 50-50 joint venture deal, which meant 50% of shares belonged to STDC and 50% belonged to Mr Musgrave and Mr Corney’s companies JC Musgrave Capital and Northern Land Management.
Why did the 90-10 share split cause controversy?
In 2021, an updated agreement to transfer shares to the private developers was signed off by TVCA cabinet members behind closed doors.
This saw companies owned by Mr Corney and Mr Musgrave – JC Musgrave Capital, Northern Land Management Ltd, and DCS Industrial Limited – increase their Teesworks Ltd shares from 50% to 90%, leaving the STDC with 10%, rather than the 50% it had held before.
At the time, Labour Stockton[7] North MP Alex Cunningham said the area was “seeing waste and dodgy deals on a concerning and escalating scale”. However, Mr Houchen said the agreement meant the taxpayer was no longer liable for the development.
He also said it allowed the freeport to secure private cash running into the hundreds of millions of pounds. The Tory mayor argued the government was not prepared to pour further public cash into the scheme after it had already parted with £246m, which meant there was a more than £200m shortfall.
A valuation seen by the Local Democracy Reporting Service puts the cost of remediating the site, excluding the 90-acre SeAH plot, at £482.6m and a nominal value of £1 was placed on the entire site.
Originally, the aim was to create 20,000 jobs over 25 years at Teesworks, with public money used to remediate some parts of the site and then cash from investors would be reinvested to remediate the next plot and so on until every spot was filled. Mr McDonald said this approach would have created a sovereign wealth fund for Teesside.
However, Mr Houchen said the remediation work needed to be speeded up so investors could take advantage of time-limited freeport tax breaks, which will be reviewed in 2026. This was the argument behind the private developers increasing their shares.
What other issues have been raised about Teesworks?
In April 2023, Labour Middlesbrough MP Andy McDonald, citing a Private Eye article, claimed that land at a 90-acre site was bought for just £1 an acre. Concerns were raised about the land, which will soon be home to offshore wind factory SeAH, after the amount noted on a transfer document from HM Land Registry was £96.79 plus VAT.
However, documents seen by the Local Democracy Reporting Service show that the land was disposed of for £15m. It is also understood that two separate valuations, from assessors registered with the Royal Institution of Chartered Surveyors, put the land at £13m and £11.8m.
Mr McDonald has since claimed the lower amount on the transfer document was for “tax reasons” and suggested that the investigators look into this.
Following Mr McDonald’s comments, Mr Houchen went on to blame the Labour MP for alarming investors. BP and Equinor are understood to have asked for clauses to be added to commercial contracts with Teesworks to guarantee it was not involved in corruption.
Mr McDonald has also questioned the use of ‘income strips’ which allow the Teesworks investors to receive a large sum of money by selling the rights to the lease for sections of land. For instance, Australian investment bank Macquarie bought the rights to the lease for the SeAH site for forty years for tens of millions of pounds.
This is an agreement between Macquarie and Teesworks that is separate and outside of the TVCA and SeAH agreement. Therefore, instead of waiting for the rent to come in each year, Macquarie has paid for the forty years upfront so Teesworks can reinvest the cash back into the site.
The site will then be leased to the TVCA for £3.65m per year but the combined authority will charge SeAH £4.3m in rent –the extra £650,000 will be kept by the TVCA, which equates to £26m over forty years.
There have also been concerns raised about the amount the developers will make from scrap at the site as they are eligible for half of the income. The latest figure for the scrap totalled £93m.
In May, Mr Houchen would not directly answer BBC[8] Newsnight’s question about how much had been spent by private developers on the freeport. Mr Musgrave and Mr Corney’s companies own 90% of shares in Teesworks.
Mr Houchen added that it was a “simplistic view to take” when asked if it was correct that the developers had not invested anything yet. It’s thought the developers have received around £45m in dividends so far from the project.
What have the region’s politicians said?
Politicians in Teesside have become deeply divided on the issue. In April this year, Mr McDonald claimed “industrial-scale corruption” had occurred and the only economic growth being delivered is “into the accounts of Ben Houchen’s pals, Messrs Musgrave and Corney.”
In response, Mr Houchen branded him a “coward” and dared him to repeat his claims outside of parliament where he would not be protected by parliamentary privilege against being sued for defamation.
A Teesworks spokesperson said the MP should make a formal complaint to the police if he thought criminal offences had occurred. In May, Cleveland Police[9] confirmed it had not received any complaints and no investigations had taken place, or are ongoing, into Teesworks.
Conservative Levelling Up Minister Dehenna Davison said the government had seen “no evidence of corruption, wrongdoing, or illegality.” Mr McDonald questioned whether she had breached the ministerial code as she was given a £2,500 donation in 2019 by businessman Ian Waller, who is a director and shareholder of Northern Land Management, which holds 25% of Teesworks shares.
A spokeswoman for the Department for Levelling Up, Housing and Communities, said the donation was declared at the time and appears in the relevant register of MPs’ financial interests.
In a parliamentary debate in June, Middlesbrough South and East Cleveland MP Simon Clarke accused Labour of a “cynical, shameless, seedy attempt to talk down Teesside”. However, Mr McDonald said that was “nonsense”.
How did an investigation come about?
In May this year, Labour’s Shadow Levelling Up Secretary Lisa Nandy wrote to the head of the National Audit Office (NAO) Gareth Davies to ask the public spending watchdog to look into the freeport. Later the same day, Mr Houchen publicly called for the same, claiming he wanted to nip allegations in the bud “once and for all”.
Levelling Up Secretary Michael Gove confirmed that an investigation would take place but frustrated Labour by not allowing the NAO to carry it out. He said he did not think it was appropriate to expand the NAO’s remit.
Mr McDonald said an NAO investigation would be independent from the government and they had “bottled it” by not allowing the body to investigate. While Shadow Levelling Up Secretary Lisa Nandy questioned how the public could have faith in a panel “handpicked” by Mr Gove would.
Local Government Minister Lee Rowley questioned why Labour was suddenly so keen on NAO-led inquiries in local government when the party had not called for them after governance issues were raised at Labour-run councils.
Who is on the investigation panel?
The investigation’s three-person panel was appointed by Mr Gove in June. The chief executive of Lancashire County Council Angie Ridgwell is the lead reviewer. She was previously a director general at the Department for Business, Energy and Industrial Strategy.
Ms Ridgwell will be supported by Quentin Baker, who is a qualified solicitor and the director of law and governance at Hertfordshire County Council and Richard Paver, who was the first treasurer of the Greater Manchester Combined Authority.
The panel will consider the allegations of corruption, illegality and wrongdoing, alongside the governance and financial management. This will include looking at the SeAH site sale, the 90-10 share split changes, and any evidence of investment by the private investor partners.
The review started in June and the panel should provide a report of their findings, along with any recommendations, in the summer.
TVCA chief executive Julie Gilhespie said it was the investigators’ hope that this would be before parliament’s summer recess, which starts on July 20. The government has said that any interested party, including MPs, will be able to make representations.
References
- ^ Labour (www.gazettelive.co.uk)
- ^ Middlesbrough (www.gazettelive.co.uk)
- ^ Andy McDonald (www.gazettelive.co.uk)
- ^ Tory mayor says he will be an ‘insurgent’ as Lord Houchen of High Leven amid peerage criticism (www.gazettelive.co.uk)
- ^ Redcar (www.gazettelive.co.uk)
- ^ Steve Gibson (www.gazettelive.co.uk)
- ^ Stockton (www.gazettelive.co.uk)
- ^ BBC (www.gazettelive.co.uk)
- ^ Cleveland Police (www.gazettelive.co.uk)