Council leaders in Newcastle have defended a decision to part ways with a developer in order to strike up a new proposal.

Newcastle-under-Lyme Borough Council say their new deal with Capital and Centric will reduce the financial risk of developing York Place, although it will mean the council no longer owns the finished scheme.

Their decision to enter into a joint venture with Capital and Centric comes just a few months after planning permission for the previous scheme was given the go-ahead in June.

The project – in Newcastle town centre – is being funded by money from the government's Future High Street Fund and Town Deal Fund.

The authority purchased York Place in March 2022, and appointed Wilmott Dixon as design and build contractors the following the month.

The developer is currently working on the Goods Yard Neighbourhood in Stoke (Nub News).

The project is broken down into stages, and the authority has the ability to pull out before each stage begins.

A report by council officers said: "The next stage would have been to get full construction drawings and costings finalised and to commence construction of the new development once the demolition works are complete in spring 2024.

"This has not been commissioned and we are not now planning to undertake the work in this manner."

The report continued: "The council has been acutely aware of the need to strike an appropriate balance between commercial risk and commercial return, particularly in the light of current interest rate and inflation rates.

"Over the last eighteen months whilst these have been in development we have seen construction costs increase sharply.

"Alongside this we have seen the cost of borrowing increase by several percentage points over the same period.

"There are early signs that early next year and into 2024 these effects could start to ease, but there remains considerable uncertainty."

The Newcastle town centre project is funded by the Future High Street Fund and Town Deal Fund (Newcastle-under-Lyme Borough Council).

Officers said that although they've had commercial interest in the initial scheme, an alternative opportunity arose to regenerate the area more quickly and at a lower risk to the authority's finances.

Deputy leader Cllr Stephen Sweeney said: "The potential partnership with Capital and Centric is a means to reduce the council's financial exposure, as the business model used by Capital and Centric would result in the asset created being purchased by them upon completion.

"That removes the financing costs and the borrowing required for the development, and the risk from under occupancy of the scheme."

He said the new plan could save millions of pounds in development costs, as there is no long a full demolition of the current building being proposed.

Capital and Centric's approach is said to be both lower in cost and more environmentally sustainable, as it will involve retaining and re-using key elements of the building's existing frame.

The developer will both design and build the scheme, which will be funded by the council borrowing from the Public Works Loan Board.

Capital and Centric will then purchase and operate the development once it's been completed.

It's estimated the new development will cost around £17 million to build.

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