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Dawn of Great Yarmouth outer harbour project

PUBLISHED: 12:11 21 February 2011 | UPDATED: 12:23 21 February 2011

The Great Yarmouth Outer Harbour operated by Eastport.

The Great Yarmouth Outer Harbour operated by Eastport.

Archant Norfolk Photographic © 2011

For more than 30 years, backers of the Great Yarmouth outer harbour had dreamed of building a deep-water port. It would be capable of ferrying the larger ships increasingly needed to transport the freight lorries of businesses such as Norfolk Line to the continent, while also servicing the offshore industry.

In the 1980s members of the then Great Yarmouth Port Authority wanted to borrow the money to fund the scheme themselves, but the idea died when Norfolk County Council refused to act as guarantor because of the risks involved to the public purse, and following that, Norfolk Line pulled out of the town.

Yet by 2000 the county council, and its then chief executive Tim Byles, was the driving force behind a revised scheme, requiring less public money and with crucial difference that a private sector partner would help get it delivered.

A specially created arms-length company, known as Eastport Great Yarmouth Ltd, was set up, with its own board chaired by Richard Jewson, now Lord Lieutenant of Norfolk and chairman of Archant, publishers of the EDP, whose remit was to get an outer harbour delivered for both the town and the county.

The company was working against the backdrop of two other initiatives aimed at breathing new life into the town, the £16.3m Integreat investment in the seafront, and the urban regeneration company 1st East, which was focused on the regeneration of the waterfront areas of both Yarmouth and Lowestoft.

And when former Transport Secretary Alistair Darling announced that the then Labour government would throw its weight behind the project in 2005, clearing the way for backers to seek EU approval, there was delight that the dream would soon become a reality.

Getting the scheme off the ground was a high-powered project, and at the time the expectations were massive.

The outer harbour was widely seen as boosting the tourist the trade and when the announcement of government approval was made, the EDP reported that around 200,000 people would travel from the town each year on the proposed ferry link with the Dutch port of Ijmuiden, opening up “a host of booze cruises and mini-breaks”.

But was it over-hyped?

Two years later when a private investor, International Port Holdings (IPH), was found, a very different commercial reality began to take shape as the global economy began to enter stormy waters.

The ferry plans were dropped, and a proposal for a container terminal emerged, which itself has since foundered, with the port now chasing business linked to the offshore industry.

Critics point out that the current operation is far from the vision which secured government and EU backing.

Instead the outer harbour, which has only been up and running for barely a year, is at the centre of a bitter debate, amid claim and counter claim over the deals done to get it built, and particularly whether public bodies including Norfolk County Council and Great Yarmouth Borough Council went too far in the assets they were willing to give away, and the liabilities they were prepared to take on.

And more crucially whether they failed to guarantee themselves a stake in the new set-up.

Papers seen by the EDP reveal just how close to the wire the project went.

These show that council chiefs in Great Yarmouth struck a last minute deal to take over responsibility for two leases of rundown land along the Gorleston West Bank amid fears that a deal to bring in a private investor to run the outer harbour was about to collapse.

Norfolk County Council and Great Yarmouth Borough Council’s cabinets both agreed to the concessions amid warnings that IPH was otherwise set to walk away.

On May 23 2007, two days before the deal with IPH was unveiled, a confidential cabinet paper presented to Great Yarmouth Borough Council recommended that members agreed to accepting a surrender of the two leases and taking over the liabilities of the West Bank, which would require further work to bring them up to scratch.

The authority was also asked to provide an extra £250,000 contribution to Norfolk County Council as part of the “agreement relating to the costs for the Outer Harbour Project”.

Members were left in little doubt that the deal with IPH and Great Yarmouth Port Company (GYPC), the firm it had created to run the harbour, could collapse if they did not agree.

“Great Yarmouth Port Company (GYPC) are adamant that they will not proceed with the Outer Harbour unless they can surrender these two leases and the Eastport Board has agreed to the proposal in principle and Cabinet agreement is now sought,” the report said. “In approving this proposal, Cabinet should note that, following the surrender of the two leases, the council will become responsible for the ongoing maintenance and repairs to the quays and piling.

“In doing so, there is a significant risk that the council may be required to spend around £1m in the near future on repairs to the land/embankment to the north of the pilot station.

“If the land cannot be sold in the absence of external funding, the full capital cost will need to be met by the council.

“Currently there is no provision in the capital programme and at some point a detailed scheme will need to be drawn up for further consideration and approval.”

The report also made clear that GYPC was not interested in the two areas because they had little commercial value.

“None of the quay headings in the two leases are commercial quays, with few mooring areas, hence the desire to surrender the leases. While the loss of rent is small, once surrendered the council would become responsible for the ongoing maintenance of the quays and piling.”

Meanwhile Norfolk County Council’s cabinet was also asked to consider as an item of “urgent business” three issues: the size of the “final contribution” to the project from the county council; provision of a guarantee for pensions arrangements; and the Haven Bridge.

County Council minutes also note that “in addition, the Great Yarmouth Port Authority’s assets would also transfer to the new port company”.

“The difficulty is that Great Yarmouth Port Authority and Norfolk County Council have largely been funding the costs of the project to date, with a smaller contribution from Eeda (East of England Development Agency),” the report said.

“IPH have argued that £18m of public funding is required towards the construction costs - effectively leaving a funding shortfall of around £1.5m, representing the council’s contribution to the project so far.

“Resolution of this issue had been left to final negotiations. Given the increased scale of the overall project, and the challenges in encouraging private sector investment, it is considered that IPH’s argument that the project will not proceed without the full £18m should be accepted,” the report recommended.

The county council also struck a deal to take on the pension liabilities of the 49 staff switching from Great Yarmouth Port Authority to Great Yarmouth Port Company Ltd, which carried with it an associated risk of £2.9m.

However, after legal advice warning that a simple guarantee would amount to state aid if there were no funds to cover any non-payment, the council effectively agreed a £3.3m ‘mortgage’, known as a land charge, over land now owned by the new company.

And in the final piece of the puzzle, the council also agreed to pay for the maintenance, improvement or reconstruction of the Haven Bridge, which had previously been the responsibility of the Port Authority.

All of this was on top of the near £18m already agreed, which included £3.13m from County Hall, £8.6m from Eeda, and £4.57m of European funds.

With these agreements in place, a deal was struck 48 hours later, and supporters believe they were a vital part of the negotiation process. But the deals have also fuelled criticisms that the two authorities had been guilty of several oversights in not factoring those assets into their contract talks in the first place, leaving ratepayers to pick up the costs instead.

Critics have long questioned why key assets, such as the inner river port, were also given away to the authority.

Yet the EDP has also learned that the body set up to bring in investors to back the project had agreed as early as February 2000 to pursue all options when it came to securing private finance, although it appeared to rule out blanket privatisation of the port.

After considering four options, which also included outright borrowing, and a joint venture company, the Eastport Great Yarmouth Ltd board agreed to pursue a strategy known as a “port operating concession”, which while a fair way towards privatisation, would see the port authority retain nominal control and ensure investment was retained in the port while providing sufficient guarantees that any private operator coming in would actually build the harbour.

That is the basis by which the port and harbour operates today.

Peter Hardy, who was executive director of Eastport, the venture set up to try and secure a deal, said as both sides moved towards an agreement in 2007 the pressure increased.

He said the overwhelming view was that the last-minute agreements were a “sprat to catch a mackerel”, and a price worth paying to secure a deal.

“For the last fortnight, the negotiations were extremely high pressure and complex,” Mr Hardy said. “There were literally dozens of matters under negotiation.

“The reality here was a situation of those with equity sitting in New York, and lawyers everywhere. The members were kept briefed throughout, but a transaction like this couldn’t wait for committee cycles, which is why there were tidying up reports afterwards.

“The deal struck needed the full £18m, and we needed to come to a deal on the Haven Bridge and the West Quay situation,” Mr Hardy added. “One factor we had to live with was that between 2005 and 2007 saw a rapid rise in marine engineering construction costs, but the figure we were stuck with was a 2005 figure.

“We were very pleased to be able to close the deal with £18m - there was no question of doing it for less. They were all essential parts of the deal.”

Labour Euro MP Richard Howitt, who had pushed for both government and EU approval of the scheme, was also in no doubt that the stakes were high.

“There was no doubt that it was the key development project for Norfolk,” Mr Howitt said. “If I could do anything for jobs and businesses in Norfolk, the top priority would be the outer harbour.”

The MEP also revealed how he had been involved in an effort to persuade the bosses of Felixstowe and Harwich Port to drop their opposition to the scheme, during a Labour Party conference - a crucial pillar to gaining government and EU approval.

“This was a super political priority above any other,” Mr Howitt said. “What we had was a series of small storms, but we kept pushing very hard. There were the issues of Felixstowe and Harwich, and we held meetings at the Labour Party Conference. There was a lot of opposition and cynicism. People said it was never going to happen.

“The atmosphere was that everything possible had to be done to make this happen, we kept being disappointed and frustrated, but we couldn’t afford to lose it.”

Paul Morse, Liberal Democrat chairman of Norfolk County Council’s scrutiny committee, which carried out its own examination of the outer harbour issue, recently remarked that the town was “grieving” for the loss of its port.

“It seems to me that what we are talking about is a very substantial, complex deal which enabled them to attract to Great Yarmouth significant private investment,” Mr Morse said. “It’s the checks and balances, swings and roundabouts. What you probably can’t do is take any of these significant things in isolation, because it’s all part of the part of the package.”

Mr Howitt also thinks it is too early to judge the scheme.

“I still think we have got to think about this in the longer term. It’s probably 20 to 25 years in the making and a rush to judgment would be a mistake,” Mr Howitt said. “With increasing environmental pressures, sea transport is going to be more important, not less.

“There are issues about transparency, but that’s not going to in any way diminish my support. Europe has a policy of the ‘motorways of the sea’, which will see ports play a major part in improving Europe’s economy. The outer harbour is very important at a European level. Without the outer harbour, we will not be serious players.”

In tomorrow’s EDP:
The outer harbour today – Great Yarmouth businesses give their views on the outer harbour
The £40m assets question – just how much is Great Yarmouth’s river port really worth?

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