Taxpayers have been told they “will not be left” with a multi-million pound bill for clearing a site for a major redevelopment in the Teesside Freeport zone.

A project called Teesworks aims to transform 4,500 acres of old industrial land on the bank of the River Tees into a manufacturing hub.

The publicly-run South Tees Development Corporation (STDC) will spend millions of pounds on clearing and decontaminating the site. Estimates suggest it will cost at least £120,000 per acre.

Labour MPs are concerned the taxpayer will cover that enormous cost, while two local developers Chris Musgrave and Martin Corney have been handed a 90 per cent stake in a company called Teesworks Limited, which has options to buy valuable parcels of the remediated land for nominal fees and then lease them to investors.

Tees Valley Mayor Ben Houchen claims the redevelopment will create thousands of jobs and generate billions for the local economy. PIC: Ian Forsyth/Getty Images

There is no record of the two developers investing money in the project, led by Tees Valley’s Tory Mayor Ben Houchen, but they are set to earn millions from lease agreements and scrap metal sales.

Andy McDonald, Labour MP for Middlesbrough, has claimed the developers are profiting from “industrial-scale corruption”.

But at a recent meeting, the STDC board was told Teesworks Limited will ultimately cover the cost of remediation work on land it acquires.

“The remediation work will be cash-flowed by STDC but when Teesworks draw down on their option, they will pay the money for their option plus the full cost of remediation,” the minutes stated.

Rishi Sunak speaks with Tees Valley Mayor Ben Houchen, during a visit to Teesside Freeport in Redcar in July 2022

“This means the public sector will make more money out of the site and will not be left with a bill as Teesworks will pay for the full cost of remediation plus interest.”

STDC, which owns 10 per cent of Teesworks Limited, said it has taken charge of remediation, so it can claim a tax break.

The corporation has previously claimed the current Landfill Tax Levy (£96.70 per tonne) could make the redevelopment unviable. But the Government has introduced a scheme that allows public bodies running redevelopment projects to apply for Landfill Tax refunds.

Work has been completed on a 90-acre plot of land, which will be rented to SeAH Wind so it can build a £450m wind turbine monopile manufacturing facility.

The freehold for the site was sold to Teesworks Limited for £96.79 (plus VAT) in December 2022 by an STDC subsidiary company.

BP Exploration Operating Company Limited is also expected to sign an agreement with Teesworks Limited and STDC, so it can build a gas-fired power plant and carbon capture facility on a 100-acre plot.

Mr Houchen said he cannot reveal how much Teesworks Limited will make from the agreements with SeAH Wind and BP. But the company receives half the money made through scrap metal sales.

By July last year, £63m had been made by selling 205,774 tonnes of scrap metal. One assessment, commissioned by Tees Valley Combined Authority, found there could be more than 370,000 tonnes on the site.

The redevelopment is part of the Teesside Freeport zone, where businesses enjoy tax breaks and lower tariffs, and it has already received over £300m of Government funding and loans.

Before work on Teesworks began, STDC secured a compulsory purchase order (CPO) in 2020 to acquire 1,420 acres of the land, which was home to the SSI steel making plant until the company went into liquidation in 2015 and owned by three banks in Thailand.

The CPO inquiry was told that in November 2019 Mr Musgrave and Mr Corney’s company DCS Industrial Limited signed a three-year lease for a 70-acre plot of land on the site, for £489,000.

The inquiry was also told that Mr Musgrave then made an unsolicited offer to the Thai banks for all the land in December 2019.

Teesside Freeport: Taxpayers told they ‘will not be left with the bill’ for clearing huge site