Doncaster Sheffield Airport: Auditors reveal "major concern" about £105m reopening plans

City of Doncaster Council has established a council-owned company called FlyDoncaster to reopen the airport and intends to loan it over £105m, using all of its share of South Yorkshire devolution funding, after attempts to find a private operator failed. The low rate of interest for the loans equates to an effective grant of almost £90m.

In November, accountancy firm Grant Thornton took the rare step of sending a “letter of concern” to the council’s chief executive Damian Allen about the plan. The letter has now been made public after being provided to a meeting of a council audit committee this week.

A separate report to the same committee meeting this week also revealed the estimated cost of minimum lease payments on a 125-year agreement the council has already entered into for the airport site has increased from £14.8m to £56.6m.

The November letter highlighted that the council’s financial exposure to the airport reopening project was increasing from an originally estimated £16m to over £100m and described the proposals as “a significant escalation in the project’s risk profile and the council’s financial exposure”.

The letter from Gareth Mills, Key Audit Partner and Engagement Lead for Grant Thornton, said: “Changes to the council’s commercial approach to the project and the level of the council’s financial exposure… in our view together significantly increase risk and present a major concern to us about the council’s arrangements to secure economy, efficiency and effectiveness in its use of resources.”

The letter said it should be considered as an “informal communication” ahead of a more formal report into the matter which “reflects our current serious concerns about issues now emerging”.

It said Grant Thornton is likely to recommend that the council undertakes more work to set out details of its financial exposure and schedules regular reviews “including consideration of potential ‘off-ramps’ for termination of the project should the financial risks exceed tolerance levels”.

It added: “We are also likely to warn against the risk of ‘escalation of commitment’, if the commercial operating environment does not prove to be as positive as the full business case assumptions.”

The letter said Grant Thornton does have the potential option to issue a public interest report and linked to two such reports into other local authorities where “councils’ have entered into complex commercial arrangements that were beyond the limits of their expertise”. The letter said Doncaster “may find these reports helpful”.

Mr Mills appeared at Thursday’s audit committee meeting where he was asked about the decision to send the letter.

He said: “Obviously a letter of that nature is not typical. In my view, I thought it was appropriate to set out our thoughts to the chief executive and other statutory officers in relation to the changing nature of that particular project.”

Since the letter was written, the project has also been backed by Chancellor Rachel Reeves, who said the Government would support the reopening but did not specify the nature of such support. The council has also announced Munich Airport International will provide operational and management services to FlyDoncaster.

Mr Mills told Thursday’s meeting: “The world has moved on since the middle of November. It is something we will be looking at as part of our 2024/25 audit work. It will be an area of focus given the significance of the particular scheme.”

Doncaster Council has also revised estimates for the costs of reopening to over £145m and a final decision on whether the investment of devolution money will be provided to the project has been delayed until the summer by South Yorkshire mayor Oliver Coppard.

He is seeking further “independent advice and assurance” over the scheme after an internal risk report carried out for the mayor’s office raised concerns about the potential risks to public money from the plan.

Government sources have indicated to The Yorkshire Post today that the reopening of the airport is a matter for the local authority and its commercial partners in response to questions about whether the Government intends to commit any national funding towards the project.

The Grant Thornton letter acknowledged the “open and transparent approach” that Mr Allen and other council officers had taken with auditors on the issue.

A related auditors’ annual report by Grant Thorton for the 2023/24 financial year noted the council has responded to the November letter and put forward a view that “the project risks should be considered against the potential economic benefits of the project”. The council’s full business case, which is yet to be made public, is reported to argue the airport can pave the way for wider regeneration work around the site which will support 5,000 direct jobs and create £9 of economic benefit for every £1 spent.

Doncaster Mayor Ros Jones, who was copied in the November letter, told a council cabinet meeting on Tuesday that reopening the airport remains her “number one priority” with the authority taking on an “entrepreneurial role” to deliver it.

She added: “It should be seen as a gamechanger not only for Doncaster but our county, the North and UK PLC.

“It is the business case that demonstrates the viability of this. With my financial background, I’d always want to see a business case that supports it and that’s what we have been presented with.

“It is going through due process elsewhere.

“I can’t wait to be on that first flight if I can afford it so we show Doncaster, South Yorkshire, the North is open for business.”

Doncaster Council and the South Yorkshire Mayoral Combined Authority respond – full statements

A City of Doncaster Council spokesperson said: “Grant Thornton are City of Doncaster Council’s (CDC) appointed External Auditors and responsible for providing an opinion on the Council’s financial statements and assessing the arrangements for Value for Money.

“As stated within the letter “we have not thus far identified significant weaknesses in relation to arrangements in place for the SYAC project during 2023-24. This is on the basis that the Council’s approach up to the end of 2023-24 was a phased approach, designed to mitigate risks and to provide opportunities to attempt to limit the Council’s exposure at key stages.

“The letter was written on 11 November prior to the South Yorkshire MCA report being considered on 12 November, Subsidy Application being submitted on 29 November 2024 and subsequently reported on 22 January 2025.

“Furthermore, reports have been taken through the South Yorkshire MCA on 11 February 2025 & CDC Cabinet on 12 February 2025 which update on the arrangements for Reopening of Doncaster Sheffield Airport and provide details on the proposition, structure, financing requirements and risk management arrangements.

“The letter was considered by Audit Committee on Thursday and its content noted.

“Going forward CDC will continue to work with Grant Thornton in relation to their responsibilities and in the context of this hugely significant project for the Council, Region and UK PLC.

“A reminder too that CDC submitted an outline business case on the financial and economic benefits of reopening the airport which was approved by South Yorkshire MCA last February. A Full Business Case (FBC) has been submitted which is due for determination in the summer.

“The FBC highlights the scale of economic growth potential should the opportunity be realised: over 5,000 gross direct jobs by 2050; GVA uplift of £5bn (cumulatively by 2050); gross welfare benefits (cumulatively by 2050) of £2bn; a project benefit cost ratio of 9:1; and a region in the vanguard of the next technological revolution, building on core regional capabilities, and reconnected by air to global markets.”

A South Yorkshire Mayoral Combined Authority spokesperson said: “SYMCA is aware of the letter to City of Doncaster Council from its auditors. Such letters are part of the robust governance and oversight arrangements that support public sector financial management.

“CDC have outlined how they intend to manage the inherent risk to the project through their Full Business Case. That business case is currently going through SYMCA’s assurance processes. The Mayor has also outlined further work to be undertaken to explore risks and their mitigations identified through an internally prepared financial risk report commissioned by the SYMCA board in November. This work will be concluded by the summer.”