Corruption scandal on Teesside threatens £600m factory investment

Plans for a £600m power cable factory on Teesside are in jeopardy as an alleged corruption scandal threatens to engulf the proposed former steelworks redevelopment and its Conservative mayor figurehead.

Global InterConnection Group, founded by British investor Edi Truell, has been planning to manufacture offshore electricity cables and interconnectors at a site on the 4,500-acre former SSI steelworks.

However, it is understood that the company has now opened talks with the Port of Tyne amid fears over mounting political pressure on Teesworks and Ben Houchen, the Conservative mayor of Tees Valley, who was handed a peerage on Friday in Boris Johnson’s resignation honours.

Global InterConnection Group’s interest has begun wavering following allegations raised in Parliament of sweetheart deals between the Tees Valley mayor and two local businessmen, according to senior industry sources.

Global InterConnection Group is not implicated in the alleged scandal.

The company is understood to want a 60-acre plot of land and has lined up a Far Eastern operator to run the factory, sources said.

Teesworks was selected because of its freeport status – which gives generous tax benefits to companies within the zone over a five-year period – and access to Redcar Bulk Terminal, a deep-sea port on the mouth of the Tees Estuary that is one of the most attractive on the east coast of England.

However, allegations of cronyism against Mr Houchen have forced bosses to think again with sources saying that opting for Teesworks could be “too big a risk”.

A final decision over whether to select the Port of Tyne or Teesworks has been scheduled for the end of June, according to sources familiar with the situation.

It means that the decision could come too early for the outcome of an independent review into allegations of sweetheart deals with two local businessmen to develop Teesworks, his flagship development and the site of Europe’s biggest brownfield regeneration.

Mr Houchen has supported calls for the inquiry, saying that it will clear his name and that allegations of wrongdoing amount to a Labour “smear campaign”.

The Port of Tyne claims to be one of the UK’s most-efficient deep-sea ports. Although an application for freeport status was rejected by the Government in 2020, the North East Mayoral Combined Authority was designated as one the UK’s 12 investment zones by ministers in March this year.

Mr Truell, a former adviser to Boris Johnson, listed shell company Disruptive Capital Acquisition Company (DCAC) on the Amsterdam stock exchange in October 2021, raising £125m from institutional investors.

DCAC agreed to merge with Global InterConnection Group in April with plans for three divisions: manufacturing high voltage cables, investing in electricity interconnectors and a consulting division to provide advice on design, planning and operational management for both grids and interconnectors.

The group indicated at the time that it had selected Teesside for “cable manufacturing and armouring facility” alongside testing and research facilities in Iceland. Preferred sites had “been identified”, the company said. The building of the factories would begin in the second half of 2023.

“The Teesside Factory, due to come into full operation in 2025, is expected to create over 800 jobs, support dozens of renewable energy projects globally, and make Britain a world-leader in the manufacture and export of [high voltage electricity] cable,” according to filings with the Amsterdam Stock Exchange.

Michael Gove, the Levelling-Up Secretary, has launched a parliamentary inquiry into the development. Angie Ridgwell, chief executive of Lancashire County Council and previously a director general at the Business Department was last week appointed as lead reviewer alongside two other senior civil servants.

Labour MPs have called for the inquiry to be handled by the National Audit Office and claimed that the panel had been “handpicked” by ministers.

Andy McDonald, Labour MP for Middlesborough used parliamentary privilege earlier this year to allege that “industrial-scale corruption” had taken place after local developers Chris Musgrave and Martin Corney came to take a 90pc stake in Teesworks despite nearly £250m of taxpayer money being spent remediating parts of the former steelworks.

Mr Musgrave and Mr Corney have denied the allegations, saying they had “nothing to hide”.

Mr Houchen has supported calls for the inquiry, however and insisted that allegations of wrongdoing amount to a Labour “smear campaign”.

His critics argue, however, that there appears to have been no public procurement process when transferring the stake to the two local businessmen.

“Irrespective of the optics. We were left in a position where Chris and Martin had the keys to unlock the steelworks,” Mr Houchen told The Telegraph last month. “Or it stays derelict and costs the taxpayer £20m-a-year and we don’t create any new jobs.”

A spokesman for Mr Houchen declined to comment to avoid prejudicing the parliamentary inquiry. Global InterConnection Group and the Port of Tyne did not comment.