Teesworks: Everything you need to know as long-awaited review is published

The report found joint venture (JV) partners at Teesworks, Chris Musgrave and Martin Corney, “have put no direct cash into the project and have received nearly £45m in dividends and payments, and hold £63m of cash”, while the public sector’s expenses so far reach £560m.

Teesworks is the enormous regeneration project taking place at the former Redcar steelworks site, managed by the public body South Tees Development Corporation (STDC), overseen by its parent Tees Valley Combined Authority (TVCA). Teesworks Ltd is the joint venture vehicle created to market and let the remediated land.

One of the most controversial aspects of the project has been the agreement which saw a 90-acre plot of land remediated at the public’s expense sold to the JV partners for £100. They went on to sell a lease on the same plot for £93m, says the report.

SeAH Wind’s monopile factory is currently being built on the contentious 90-acre plot. The report examines the cashflow of all stakeholders in the complicated lease wrap agreement for the land and determines the public sector has a net loss of £51m from remediation and disposal of the site, while the JV partners’ overall gains are worth £68m.

Some of the earliest concerns surrounding Teesworks were regarding the share transfer which saw the 50-50 joint venture company, Teesworks Ltd, become 90 per cent owned by private partners led by developers Chris Musgrave and Martin Corney in November 2021.

In late 2019 the duo acquired a lease option on a 70-acre plot of land from Redcar Bulk Terminal adjacent to the site of SSI UK’s steelworks which shut in 2015. The firm’s receivers, banks in Thailand were planning to object to compulsory purchase proceedings by STDC but a move by Mr Corney and Mr Musgrave to offer a joint venture to Lord Houchen meant the banks’ objections were not strong enough.

Lord Houchen and TVCA chief executive Julie Gilhespie gave evidence to the panel saying this offer was not open to negotiation.

In the wake of Teesside being granted freeport status in March 2021, the decision was give 90 per cent of Teesworks to the JV partners to incentivise development.

But the decision notice to approve the share transfer was not signed off by the group’s Monitoring Officer, its legal chief.

The report highlights a number of concerns relating to the former Monitoring Officer who left his role in December 2022 - and for whom TVCA is yet to recruit a permanent replacement.

According to the statutory officers, the decision to approve STDC’s share transfer in Teesworks Ltd did not meet the threshold for referral to TVCA. “The Panel,” the report states, “reached a different conclusion”.

The original 50-50 deal saw the JV partners being able to buy remediated land based on a market value formula. However, the new 90-10 agreement provided the land for a fixed value of £1, which the report says, has “the potential to significantly increase the financial returns available to Teesworks Ltd and the JV Partners and conversely reduce the proceeds realised by STDC.”

An independent panel of three local government experts, chaired by Lancashire County Council chief executive Angie Ridgwell, was convened by Levelling Up Secretary Michael Gove in June last year to investigate “serious allegations of corruption, wrongdoing and illegality that have been made in relation to the Teesworks Joint Venture.”

“The only reason we had the investigation,” Conservative Lord Houchen told the BBC’s World at One programme on Tuesday, the day after the report’s publication, “is because [Middlesbrough MP] Andy McDonald stood up in Parliament using privilege and said there was ‘industrial-scale corruption’.

“In the report, it explicitly says ‘there is no evidence of corruption’.”

And while headlines focused on the panel’s failure to find evidence of illegality, the report states, “there are issues of governance and transparency that need to be addressed and a number of decisions taken by the bodies involved do not meet the standards expected when managing public funds.”

It continues: “The Panel have therefore concluded that the systems of governance and finance in place within TVCA and STDC at present do not include the expected sufficiency of transparency and oversight across the system to evidence value for money.”

The report sets out a 28 recommendations to improve governance, transparency and decision-making in relation to TVCA, STDC and Teesworks.

Other issues raised include concerns over undeclared conflicts of interest, state aid subsidy laws, missing or incorrect legal advice in relation to major transactions, and improper scrutiny or oversight in relation to the establishment of the joint venture.

Originally expected to report back in a matter of weeks, the panel took seven months to provide its findings. “Securing the information in a way that could be easily navigated was challenging,” they wrote.

“Initially, the Panel were overwhelmed with documents presented in an unstructured way and lacking a cohesive narrative. Subsequently, responses were limited to the specifics of the question posed. This has caused drift and delay in the process and reduced our confidence that we have been given access to all relevant materials.”

Despite this “reduced confidence”, the investigation reviewed more than 1,400 documents and held around 45 interviews.

While one of the report’s recommendations is the need to renegotiate the 90-10 joint venture agreement, it believes this will not happen. “The JV partners see no prospect of renegotiating a deal that rebalances their relative advantage over STDC,” it says.

The panel determined there was the potential for conflicts of interest to arise because of shared staff in TVCA and STDC. Julie Gilhespie is a director of TVCA, STDC and Teesworks Ltd, a situation the report says in reference to the share transfer would “give rise to a perception of conflict due to the fact that the decision involves the significant benefit to [Teesworks Ltd] to the detriment of STDC and by extension TVCA.”

“When asked about this,” the panel writes, “the Chief Executive confirmed that she hadn’t recorded any potential conflict because she didn’t recognise there was any.”

In its conclusion the report concedes: “Teesworks and the regeneration of the former Redcar Steelworks is a vast and complex project. The area desperately needs, and welcomes, the opportunities the site can offer and much has been achieved in a relatively short space of time.”