Teesside Freeport: Calls for investigation into major redevelopment after corruption allegations

The public spending watchdog is being urged to conduct an investigation into a redevelopment project in Teesside which has been marred by allegations of corruption and cronyism.

Darren Jones has announced Parliament’s Business and Trade Committee – that he chairs – will conduct an inquiry into the “reported issues” surrounding the Teesworks project, which aims to transform the former Redcar Steelworks site into a manufacturing hub.

The MP also said he asked the National Audit Office (NAO) to “undertake a thorough investigation to assist us in our work”.

Hide Ad
Hide Ad

“My committee will not have the capacity to undertake the depth of inquiry that seems to be required. I'm therefore writing to ask the NAO to undertake such an inquiry,” he added.

Rishi Sunak and Ben Houchen at the Teesworks site in Redcar, in July 2022Rishi Sunak and Ben Houchen at the Teesworks site in Redcar, in July 2022
Rishi Sunak and Ben Houchen at the Teesworks site in Redcar, in July 2022

It comes after Shadow Levelling Up Secretary Lisa Nandy asked the NAO to probe the project and answer "important questions about the transfer of a vital public asset into private ownership".

Tees Valley’s Tory Mayor Ben Houchen, who is leading the redevelopment, said he also wrote to the NAO to request an investigation because he has “nothing to hide”.

The NAO has previously reviewed the business case for the taxpayer-funded project. However, the watchdog cannot conduct a detailed audit of the accounts without approval from Housing Secretary Michael Gove, because it is being run by a Tees Valley Combined Authority and not central Government.

Hide Ad
Hide Ad

It comes amid concerns that hundreds of millions of pounds of public money is being spent on clearing the site, but when the land is leased to investors most of the profits are paid to two developers, Chris Musgrave and Martin Corney.

Shadow Levelling Up Secretary Lisa Nandy has called for a full investigationShadow Levelling Up Secretary Lisa Nandy has called for a full investigation
Shadow Levelling Up Secretary Lisa Nandy has called for a full investigation

The developers have been handed a 90 per cent stake in Teesworks Limited – a company which has options to acquire valuable parcels of the land on the 4,500 acre site on the bank of the River Tees.

They profit from multi-million pound lease agreements and also get half the money made from scrap metal sales – more than £93m so far – even though there is no public record of the pair directly investing in the project.

In a letter to the NAO, Ms Nandy raised concerns about "the potential loss to the public from these transactions" and the "almost total absence of sufficiently robust oversight or accountability".

Hide Ad
Hide Ad

The NAO said it usually has “no remit” to examine spending decisions made by local bodies with devolved powers, but it has previously reviewed the business case for the project because it has received more than £350m of central Government funding and loans.

The watchdog also said its initial enquiries “indicated that Government funding had been used as intended”.

However, Mr Houchen said he wants the NAO to conduct a full investigation, because “spurious allegations” about the project are deterring investors.

“I want this nipped in the bud once and for all," he said: “Without a swift, decisive conclusion to this situation, Teesside will miss out on thousands of jobs and billions of pounds of foreign direct investment.”

Hide Ad
Hide Ad

Prime Minister Rishi Sunak has previously endorsed the project, claiming it is a shining example of levelling up. The site is also within a Government-approved freeport zone, where businesses enjoy a range of tax breaks.

Mr Houchen has said the developers were given a 90 per cent stake in Teesworks Limited in 2021, because they agreed to cover the enormous cost of remediating the land they acquire, after borrowing the money from the publicly-funded South Tees Development Corporation (STDC).

Remediation work, costing at least £120,000 per acre, has already been completed on a 90-acre site, which is being leased to SeAH Wind so it can build a wind turbine monopile factory.

A HM Land registry document appears to show the site was sold to Teesworks Limited for £96.79 (plus VAT) in December 2022, by an STDC subsidiary.

Hide Ad
Hide Ad

Mr Houchen said it was actually sold for its “proper commercial value” of £15m, and that deal was signed off by the STDC board in August 2021. But there is no record to show that payment has been received yet.

An STDC spokesman said the £15m site is listed as a fixed asset in the accounts of its subsidiary – South Tees Developments Limited – for the financial year ending March 2022 and the payment will be recorded as a receivable on the next set of accounts.

Teesworks Limited sold the rights to lease the site, over 40 years, to Macquarie Group for tens of millions of pounds.

Under the current agreement, Macquarie Group leases the site to STDC’s parent company Tees Valley Combined Authority for £3.65m, which will then itself rent the land to SeAH Wind for £4.3m a year.

Hide Ad
Hide Ad

BP and Equinor also recently signed a lease agreement for a 100-acre plot with Teesworks Limited and STDC, so they can build a gas-fired power plant and carbon capture facility.

But before it was signed, they asked Teesworks directors for legal assurances that none of assets at the site had been acquired through an “unacceptable act”.