Profits at the controversial Teesworks project, a flagship regeneration site in north-east England, tripled last year after private sector companies were handed ownership of much of the scheme.
The latest accounts for Teesworks Ltd, a public-private initiative to redevelop the 2,500 acre former steelworks, show that net profits rose to £54mn in the 12 months to March 2023 after an “exceptional” financial year.
The transfer of the company into majority-private ownership in November 2021 is subject to a government inquiry over value for public money.
The project’s private sector partners and related companies appear to have received tens of millions of pounds in commission and dividends over the last two financial years, according to the accounts.
Teesworks was set up in 2020 on a 50-50 split between a public body overseen by Tees Valley’s Tory mayor Ben Houchen, and companies controlled by local developers Chris Musgrave and Martin Corney.
In November 2021, a further 40 per cent of the company’s shares owned by the public body — the South Tees Development Corporation — were transferred to the developers for zero cash consideration.
STDC has said the move would shift £172mn in future liabilities to the private sector partners. But the transfer prompted concerns about the project’s value to the taxpayer when details emerged.
An independent government inquiry into the finances and decision-making underpinning the project was ordered in May but has yet to report back.
Teesworks Ltd’s latest accounts, the first time it has disclosed a full set of financial figures, show that in the year to March net profits more than tripled from £15mn in the prior year.
The company’s performance was “exceptional, having exceeded all major milestones and performance ambitions in terms of land clearance, land availability and lease negotiations”, according to the accounts.
The accounts show a large increase in turnover from £54mn to £142.9mn, driven by £93mn in “lease premium and land option income”, as well as £49.5mn from scrap sales.
The income included selling a long-term lease on 90 acres of land to Australian investors Macquarie, part of a complex deal that involves South Korean wind farm manufacturer SeAH becoming an anchor tenant.
Teesworks had total long-term liabilities of £10mn owed to a related party, the latest accounts show.
The accounts also show that £3mn in dividends was paid out in the year to March, leaving £51.3mn remaining in shareholder funds. The previous year, ending March 2022, £21mn in dividends were distributed.
As a result of their shareholdings, companies owned by developers Musgrave and Corney are entitled to at least 90 per cent of dividends paid from November 2021 onwards.
The accounts also state that a related party company with “a participating interest and shared directors” also received £22mn in commission for “marketing and other consultancy services” during the year to March 2023.
The previous year it received £16.7mn for the same services. The accounts do not name the related party company.
In November 2021, a Musgrave and Corney-controlled firm called DCS Industrial agreed to provide “marketing and other consultancy services” to Teesworks “to facilitate the disposal of scrap from the site”, according to documents obtained through a Freedom of Information Act request by the magazine Private Eye and seen by the Financial Times.
DCS Industrial is a shareholder in Teesworks Ltd. STDC did not comment on whether DCS Industrial is the related company referenced in the accounts.
Teesworks Ltd, which has previously responded to press queries on behalf of Musgrave and Corney, did not respond to a request for comment.
The accounts were audited by Chipchase Manners, a Middlesbrough-based firm with three audit partners, according to the register of statutory auditors, rather than a major audit firm. The firm declined to comment.
Teesworks Ltd’s accounts for the year to March 2022 were not audited, as they were deemed exempt under small company rules.
The rising profits at Teesworks came as public funding for the redevelopment project, including taxpayer loans, increased even after the share transfer in late 2021, the Financial Times reported in November.
Houchen, who has made post-industrial regeneration and job creation his main goal, has said the developers have taken on substantial liabilities.
Speaking at his third-term campaign launch at Teesside Airport on Monday, Houchen said his “big, bold and risky” decisions in office had created “thousands of jobs” and “excitement” among investors.
“It’s not an issue of ‘if’ the jobs are coming, the jobs are now coming,” he said of strategies such as that at Teesworks.
The STDC, the public sector partner in Teesworks Ltd, said it would not comment because of the ongoing government inquiry. STDC referred to a previous statement that said it was “committing hundreds of millions of pounds to remediate and service large parcels of land for future tenants”.
It added that government-funded work at the site was “largely completed”.
The project has been through three government business case approval processes and has already created 4,635 jobs through signed contracts, leveraging £2.1bn in private sector investment, STDC said.
