TEES Valley Mayor Ben Houchen has told The Northern Echo how the region could have lost its biggest development, and 20,000 jobs, without private developers stepping in.

Angered by criticism that he was giving away Teesside's 'crown jewels'  after an agreement saw more shares in the vast Teesworks regeneration scheme go to a private firm, Houchen has opened the files on the deals and conversations that took the site from a clean-up operation to the UK's largest industrial zone.

Why the criticism?

Joint venture partners JC Musgrave Capital and Northern Land Management joined forces with the South Tees Development Corporation in 2020 to realise ambitions for the 4,500 acre site south of the River Tees. That was for a 50% stake, but now 90% of shares in Teesworks Ltd rest in the hands of JC Musgrave Capital, Northern Land Management Ltd, and DCS Industrial Limited.

Who are the developers?

Teesside businessmen Chris Musgrave and Martin Corney lead the joint venture partners at Teesworks. DCS Industrial Ltd, which now holds 40% of Teesworks Ltd shares, was formed in 2019 and is owned by the partners.

Read more: Ben Houchen accused of 'selling people down the river'

How did we end up with Teesworks?

Ben Houchen told the Echo: "When I got elected one of the mandates that I was given was to basically stop the steel site costing the taxpayer £20 million a year which was just to keep the site safe and keeping people off it. Before I was elected, there was no conversation about 'let's put more money into this and regenerate it into jobs'.

"They said we want you to set up the Development Corporation and put the board formally in place because government were managing it directly through the Department of Business. But I thought that didn't really feel ambitious enough, so we came out with this plan to create 20,000 jobs over the next 25 years."

How was that plan paid for?

From 2017 over a two or three year period we got just over £270 million from the government. But from July of this year when the last part of the steelworks is knocked down - so there's nothing left on the site and it's all safe, and it's all secure - we'll have spent the £270 million. There won't be any money left.

"That also means that the 89 people employed on site to keep it safe and make sure it's all managed securely and properly will be made redundant because there is nothing left to do for the Development Corporation. It will in effect have achieved its original goal that the Government said that they would fund with £270 million."

So who pays for the new plan?

"To completely demolish and remediate that site and make it investor ready costs £482.6 million. 

We know that now because  we know the cost of the demolition and making safe and we also know how much it costs to remediate an acre of land, because we've had to do it.

The Northern Echo: Tees Valley Mayor Ben Houchen. Picture by Sarah CaldecottTees Valley Mayor Ben Houchen. Picture by Sarah Caldecott  

"So the GE factory, for example, costs us about £80,000 an acre. To remediate some of it costs £100,000 an acre because it depends on what's underneath the soil, putting the land back in, and so on.

"When you take £276.5 million, which is the specific number we got from the UK Government away from £482million that leaves you with a funding gap of £206.1million."

Did you have to go to a private developer?

"Option one is we don't do anything and the site closes down. We've finished our job and we go back to the original intent, which was just to knock it down - but we don't see a single job on the site. That doesn't feel like an option to me.

“The second option is we could go back to Government and ask them for the £206million which, to be brutally honest, just isn't an option. I’ve asked and we won’t get any more money. The Government are not going to give me another £206 million and they’re sticking to the original arrangement. They’re unwilling to spend another £206m of taxpayers money on the site beyond the £270m we’ve already been given.”

"So the third option, which was always the option when we started to accelerate, is we're going to need private investment to make the site work. and because of the work we've done in knocking down the site and using a small amount of money to remediate a couple of parcels of land to encourage investment, all of a sudden we got interest from the private sector. 

Read more: Tees mayor warns Tories could lose next election

"And for me that just means that we deliver the jobs and investment that people actually want, because I don't think people out there are really that bothered about the detail of the process and the detail of the structures of the development corporation. 

"People say When is construction starting? When will the jobs come in? When is the investment actually going to land? Announcements are great, but when does it become real? 

"That's what people care about."

So why agree to the developers having almost all of it now?

"Their argument was 'well, we appreciate you put some money in, but this site is still worth a negative £200 million. If you're wanting us to have an obligation to put that money in we want the whole site'. That was the starting point of the negotiation and it would be a brave person to suggest otherwise. 

The Northern Echo: Ben Houchen sets out the Teesworks timelineBen Houchen sets out the Teesworks timeline

"But to be fair to them, Martin's born and raised in Darlington and Chris is from Hartlepool, and they recognised the local importance meant that there had to be a level of public ownership in it. 

"So they didn't fight very hard, but we had to make the argument that there's no way we could allow them to walk away with this site. We had to retain ownership so that there was always income coming back to us that we could reinvest in other things, so that was ultimately where the negotiation went."

Why wasn't there a pitching process for developers in the first place?

Well, because there WAS one for the airport development, That was won by DCS, the development vehicle run by Chris Musgrave and Martin Corney, by now probably two of the most successful developers in the North of England. That put them on Ben Houchen's radar and became particularly important when he was fighting to gain control of the steelworks site from the three Thai banks that had an £800m mortgage on the land.

Houchen says: "We did a deal with the banks back in May of 2018 when I went out to Thailand with Steve Gibson and a couple of others. But that collapsed because actually there was nobody intent on the part of the Thai banks to really honour the deal that we did."

Eventually Houchen and his team were forced to trigger a Compulsory Purchase Order, which they were confident of winning - until British Steel collapsed. That meant British Steel no longer owned the Redcar Bulk Terminal, which they had jointly owned with SSI. So SSI took it over - and still own it today.

That put the CPO at risk because SSI put forward an alternative plan for redevelopment, which might have led to yet more negotiations but - and Houchen readily admits this is 'luck of timing, or a moment in history' - Chris Musgrave and Martin Corney came up with a solution that secured their long-term future with the site.

What was the turning point?

They told Ben Houchen they owned a significant legal interest in RBT - about 70 acres of land on the right hand side - and SSI were now badgering them to give them that legal interest because they couldn't really properly redevelop the 280 acres they've got without controlling the whole thing.

Remarkably, SSI told Chris and Martin that if they gave up the 70 acres that united the RBT site, they could have the rest of the steelworks site in exchange, because they believed it had nine-figure potential with plans from Anglo American - owners of the Woodsmith polyhalite mine - to run their 23-mile conveyor belt into the terminal.

So Chris Musgrave and Martin Corney hot-footed it to the STDC and proposed a development partnership.

It was a vital deal for you, but very lucrative for them

Ben Houchen: "If they deliver on what they say, then absolutely. But there's still a lot of hard work and just because they get into a joint venture with us doesn't mean that they've made a lot of money. There's a huge amount of work that could still go wrong.

"What it's done is given them a huge opportunity. But they've got to take that opportunity and work with us to deliver it."

What due diligence was there?

"One of the conspiracy theories is that there's no paperwork and no process, as if I'm some kind of like Teesside demi-god who can just like wave my hand and things will happen. 

"We had to document and get agreement for that relationship and make sure that it was legal because I've got to take that to the Development Corporation board. 

"So we had to instruct lawyers, consultants, property agents, and go to the board and say this is what's happened, this is where we've got to. and this is the deal that's been done. And the decision by the Development Corporation was unanimous."

That scrutiny was followed by Combined Authority approval from all five authority leaders and then the Department for Business and Treasury 'crawled all over it' because of the Government money involved earlier on.

"This was the most scrutinised deal Teesside has ever done," said the mayor.

"I'm the best salesman for Teesside that there is, and I can get people through the front door, but then you need people with expertise. 

You need a developer to say OK, well you want to build a factory - How big is the factory? How much is the weight bearing on each of the pillars? What are the remediation standards? Who's going to do your contracting or who's going to manage your subcontractor? 

"There is no expertise in the combined authority or the Development Corporation that can do that. It's not just about them helping us with demolishing and getting the site ready - they are a massive part of us delivering investments to the site."

Criticism seems to really annoy you - why take it so personally?

"I'm not going to pretend that this hasn't played on my mind because it's upsetting to me that I've dedicated five years of my life to do this. Other people, not just me, but in this office and our partners and the people on the site are absolutely busting their balls to try and get this sorted out. And we still have idiots on the sidelines just sat there trying to cause problems.

"This project is personal to me. Instead of standing at the last election I could have gone off and made huge amounts of money going to work in London and in the city and doing whatever I wanted to do - and I wouldn't have to worry about all the nonsense that goes on and all the crap you get.

"That's not what I'm about. The reason why I have a passion in life is that I have a focus. I want to be here in five, six or seven years time looking at something that can't be taken away. 

"Money is fleeting and you can't take it with you when you go on, but that will exist and that that's why this isn't a job to me, this is personal and there are all sorts I could talk about in my personal life that I've forgone because of this job."

Does it mean enough to stop you accepting a Government role?

"People have called me and conversations have taken place about the next election, but I'm not interested - it's not what I'm about."



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