A major developer is rethinking a £25m project in Wirral after huge interest rate rises linked to the Liz Truss administration.
The Maritime Knowledge Hub is a major project to transform the old Hydraulic Tower on the Birkenhead docks which has been derelict for over 50 years. Peel L&P, the developer behind the project, said it could bring in 4,000 jobs and would be "a symbol of the renaissance of the east bank on the Wirral."
The plan is to turn the building into "a world class centre of excellence, focused on job creation, innovation, engineering, R&D, entrepreneurship and training" to make shipping more environmentally friendly.
Planning permission was granted for the hub in March 2023 and Peel was hoping to begin the project this year. However a Wirral Council capital funding report said the plans had become unviable following a rise in interest rates linked to the short-lived government of former Conservative Prime Minister Liz Truss in 2022.
Following the announcement of a new mini-budget in September 2022, the value of the pound fell, borrowing costs of government bonds and interest rates rose while inflation, the rate at which prices rise, hit 11.1%. Interest rates in September 2022 were 1.75% but were at 3% by November and now stand at 5.25%.
The report said: "The former proposal whereby the council was proposing to take a 250-year lease and fund the project through borrowing became unviable following the rise in interest rates following the Truss administration."
It said Wirral Council continues to work with Peel L&P and the Liverpool City Region Combined Authority (LCR) to develop the project and "all parties are committed to its development and delivery."
A different way of funding the project is now being considered "where the council will take a head lease to mitigate some of the developer risk and enable the project to progress."
Asked for an update, Richard Mawdsley, Director of Development for Wirral Waters, said: "We are working hard with partners including Mersey Maritime and Maritime UK, Wirral Council, the Liverpool City Region Combined Authority, Universities, and other partners, to preserve and enhance the maritime heritage of these iconic structures and bring the Maritime Knowledge Hub to life.
"Planning permission has been secured and preliminary works have started on the site. Once various agreements are in place with stakeholders, funding partners and key occupiers, we hope to be ‘breaking ground’ in the summer of 2024.”
Labour council leader Cllr Paul Stuart said: “The UK is paying the price for the disastrous Liz Truss and Kwasi Kwarteng mini-budget that broke Britain. A direct result of their fiscal incompetence is having a knock-on effect on regeneration plans in Wirral."
He added: "Wirral Council officers are working with partners to assess the best options in the current economic climate to take this project forward. The Hydraulic Tower is a key landmark within Wirral Waters, and the Maritime Knowledge Hub has planning permission secured to provide a centre of international excellence. I hope to see the project get underway."
Leader of the Conservatives in the council Cllr Jeff Green argued the pandemic and the war in Ukraine has contributed to rising costs. He said: "It has been a long held ambition to re-purpose this building and the current opportunities, made possible through Government funding to the LCR and Levelling Up resources, have been essential to bringing the latest, exciting plans to this stage.
"Clearly, with a global pandemic and the war in Ukraine, it has been accepted across the construction industry, and regeneration projects, that the resulting inflation has seen the cost of such projects increase.
"The partners involved in seeking to bring this particular project to fulfilment have shown themselves willing to find innovative solutions. However, like all significant financial risks to public / taxpayers investments, substantial due diligence will be required."