The businessmen who hold a 90% stake in the controversial Teesworks development described the site as a “dog with fleas” which they had worked tirelessly to turn around, according to public documents.
Private developers Martin Corney and Joseph Musgrave complained about “politically focused” public perceptions where they were criticised after “securing billions of pounds of investment and thousands of jobs”, according to minutes of a meeting of the Teesworks Ltd joint venture partners. They said the public sector would not own all the land – and would still be “wasting tens of millions a year” – without them, the document also reveals.
But they said they would “reluctantly consider renegotiation on some matters” after an independent inquiry recommended the South Tees Development Corporation (STDC) look into renegotiating a better deal for taxpayers. The Tees Valley Combined Authority (TVCA) is waiting for a further response from the businessmen on this.
The Teesworks review by three local authority officers reported in January and found no evidence to support allegations of corruption or illegality linked to the finances at the Teesworks development, saying it brought economic benefits and created a potential 9,000 jobs. But it criticised governance at the TVCA and STDC, with “inappropriate decisions”, “lack of transparency” and “excessive confidentiality”, saying “the principles of spending public money are not being consistently observed”.
It made 28 recommendations to improve the handling of the project, one of the biggest brownfield remediation projects in Europe with more than £560m public sector investment. One of these said STDC “should explore opportunities to influence when and how land is drawn down and developed and if possible, renegotiate a better settlement for taxpayers under the JV agreement”.
Group chief executive Julie Gilhespie wrote to the businessmen asking them to consider this last month (August). She said: “One of the concerns that the review panel had about the Teesworks joint venture is the fact that Teesworks is not obligated to draw down land, leaving concern that the site may not be fully drawn down, leaving the public sector with significant liabilities.”
A meeting was held three days later at Teesworks Skills Academy. The two businessmen said the joint venture agreement was “entered into before the land was formally secured from SSI and the ability to acquire the land was a direct result of their leverage”, according to the meeting minutes.
Mr Musgrave and Mr Corney came to take a 90% stake in Teesworks, previously a 50-50 public-private partnership. Mr Musgrave told the meeting “the public sector would not own all the land if it wasn’t for their involvement” and said the 90-10 shareholder agreement change “fully reflected the development liabilities being transferred, which runs into the hundreds of millions”.
Mr Corney stressed “the public sector would therefore still be wasting tens of millions a year safeguarding the site, with none of the current development underway”. They both “expressed disappointment they felt the review and subsequent public perception was ‘politically focused’ and did not acknowledge that the site was a ‘dog with fleas’ and the JV partners have worked tirelessly to turn it around to create a site of vast opportunity, securing billions of pounds of investment and thousands of jobs, yet such hard work and success has now led to a significant amount of criticism of them”.
Mr Corney also said senior employees and staff had worked on Teesworks full-time for several years, “and parked many of their other business interests, significantly reducing income and loss of business profit”. Mr Musgrave spoke of “the level of public interest in ensuring the success of the site and in particular that the public sector was not left with liabilities following redevelopment”.
And the men agreed “given the political spotlight that has been placed on this project and to avoid any further negative publicity directed towards the site which would further dent investor confidence and hinder development progress they would reluctantly consider renegotiation on some matters”.
Mr Musgrave said all joint venture agreements were legally binding and “entered into with full detailed consideration by both parties and following due process”, with professional legal representation. According to the minutes, he made clear the private sector partners were “not required or obligated in any way to vary the terms of the joint venture agreement”.
The next day, group chief executive Julie Gilhespie wrote to the businessmen saying: “We accept your position that legally you don’t have to vary the joint venture contracts or make any amendments to them, however, thank you for confirming you are willing to consider making some variations given the circumstances.”
She asked them to consider the length of option period, land draw-down, reporting and other concessions or amendments “to help ease tensions around this and create more harmony”.
The issue was discussed at the TVCA overview and scrutiny committee meeting on Wednesday (September 4), where Emma Simson, acting group chief legal officer and monitoring officer, said: “We haven’t yet had a response. The reason being that they are carrying out some economic analysis and they will be coming back to us.”
Councillor David Branson, from Middlesbrough Council, said: “It’s going to be very difficult to renegotiate. It’s a contractual arrangement. I sometimes think we’re kidding ourselves that the other party are going to renegotiate a contract which is so clearly in their advantage.
“We have to look at what areas of the contract enable us to change things for the future, that don’t involve changing contract. When land is being drawn down, do we have any particular things we can insist on?
“I think that’s the only way we can get a better deal. It would be nice to think we can renegotiate it but… it’s looking very difficult. It’s looking to what we can do in future and looking to make sure we don’t get into this kind of mess in the future.”
