Preparation for Construction of South Bank Quay, Teesworks

Scott Hunter

5 February 2024

Between 2018 and February 2020, Tees Valley mayor, Ben Houchen, and the South Tees Development Corporation were in negotiation with port specialists, Able UK, with a view to building a quay and manufacturing units at South Bank Wharf. Negotiations had reached an advanced stage, with due diligence being undertaken, when, on 24 February 2020, Able UK CEO, Peter Stephenson, received a letter from Houchen.

The letter stated, bluntly, that the deal was off.  The reason given was that Able had not provided adequate information to convince the STDC board that it could fund the project.

Tees Valley Monitor has obtained a set of documents relating to this incident, which cast some doubt on the mayor’s judgement on this issue, and his commitment to ensuring value for money for the taxpayer. These documents include Houchen’s original letter.

Houchen Kickstarts the Project

Some 18 months later, in September 2021, the company that eventually won the contract to build the South Bank Quay, Graham Construction, posted the following on its website

“Tees Valley Mayor Ben Houchen has today (30 September) welcomed UK contractor GRAHAM to the Teesworks site to kick-start development of the new South Bank Quay.”

In the intervening period, a couple of things had changed. One of these was to do with funding. In 2020, Able was offering to invest £130 million in the project, based on privately raised finance. By late 2021, Houchen had negotiated a loan of £107 million from the newly created UK Infrastructure Bank to finance the building of the quay.

In other words, Houchen rejected an offer of £130 million of private sector investment in favour of a taxpayer-funded loan.

But was the board correct to doubt that Able UK could actually raise the finance? No, they were not. Also contained in the tranche of documents we have obtained is correspondence from KPMG who undertook the due diligence (unusually, and at STDC’s insistence, paid for by Able), which concludes,

“Based on our understanding of the business and our views of the current debt market, we are very confident that a £130m refinancing  … is realistic and achievable at the present time.”

In other words, Able UK would have no difficulty obtaining debt funding to finance the project. Yet, as Houchen was keen to stress the STDC board did not have confidence that Able could deliver the project. Houchen observes in this letter,

This may come as a surprise to the panel who recently presented the Tees Valley Review into corruption at Teesworks, who were convinced that Houchen has long since done his best to keep the STDC board in the dark about key decisions, preferring instead to rely on the advice of a few select  individuals.

Now, had this project gone ahead, the relationship of Able UK to STDC would have been quite different to that of GRAHAM. Able presented as investors, not contractors, and they would have been looking for a return on their investment.

Instead of that, the taxpayer funded project sees control of the quay pass to developers Corney and Musgrave, at no cost to themselves, while the leasing arrangement for the new SeAH wind factory nearby will earn them millions, again at no cost to themselves. As the Review report states, Corney and Musgrave have, to date, invested none of their own money into the project.

Houchen supports local business

In addition to the fact that Able were offering private sector investment in a project that until that point had received none, there is the matter of supporting local business. This is something that Houchen has stated on numerous occasions is something he strives to do. This statement on his website in August 2020:

“Just like with the contracts we are putting out for tender on the TeesWorks site, we want local businesses and local workers to feel the benefit and be part of these huge projects. That’s why I am doing all I can to put local businesses, from across the region at the front of the queue for work on these amazing projects.”

At which point we observe that, in addition to the financial benefits that the project would have brought to STDC, Billingham-based Able UK is local while GRAHAM is not. 

Timing of the Cancellation of the project with Able

One thing that is abundantly clear from the correspondence is that it came as a bolt out of the blue to Able CEO, Peter Stephenson. As he states in his reply to Houchen’s letter:

“You will appreciate that we are still reeling following the receipt of your letter yesterday.”

The upshot of this is that it is necessary to consider not only the integrity of the reasons given for the cancellation of the project, but also whether there is any significance in its timing.

It may be nothing more than coincidence, but Houchen’s letter is despatched immediately after negotiations over the CPO of land formerly belonging to steel producer SSI UK have concluded. Those negotiations resulted in, among other things, the creation of a joint venture partnership between STDC and the developers (we learn from the Review that the JV was first proposed to the STDC board in February, and subsequently to the TVCA board in March 2020).

We appreciate that the information we have presented here was not made available to the Tees Valley Review panel. At some point there needs to be a second review of Houchen’s management of the STDC (and one that should extend also to the management of Teesside Airport, and other initiatives). When that review happens, some assessment must be made of his decision in relation to Able UK’s proposed investment. He needs to be held to account for his decision to walk away from the offer of £130 million in private sector investment. In addition, he must justify the delay to what he himself has described as a time-sensitive project.

Given the privileged position enjoyed by developers, Corney and Musgrave, he must also give an account of what their involvement may have been in prompting this decision, given that they, more than anyone, have benefited financially from its cancellation.