Select Committee on Transport, Local Government and the Regions Memoranda

Memorandum by Stoke on Trent City Council (ERF 10)


  This statement is an account of recent difficulties in attempting to establish the Middleport Waterfront Townscape Heritage Initiative (THI) in Stoke-on-Trent, due to the DTI's interpretation that heritage funding is subject to European State Aid restrictions. The wider implications of this interpretation are also discussed.

  Throughout the development of the Middleport THI project over the past 18 months, both English Heritage (EH) and the Heritage Lottery Fund (HLF) have held the view that heritage funding was exempt from European state aid restrictions. However, at the final stage of the SRB6 application process, Advantage West Midlands, the regional development agency, withheld funding on the ground that the scheme broke state aid rules, the HLF portion of the budget being subject to them as well as SRB6 money. Both Government Office for the West Midlands and the State Aid Policy Unit of the European Policy Directorate of the DTI and have since stated the view that English Heritage and Heritage Lottery Fund grants are subject to European State Aid restrictions. The HLF and English Heritage consider their funding to be permissable under State Aid Rules.


  The Middleport Waterfront THI is a heritage based area regeneration initiative based around a mile length of the Trent and Mersey Canal in Middleport, Stoke-on-Trent. The Heritage Lottery Fund (HLF) has granted £1,252,000 towards the scheme. This is proposed to be matched by £520,000 of SRB6 money to create a common fund of approximately £1.8 million. This common fund would be used to make grants of around 60 per cent towards the cost of works to repair buildings and make them weatherproof, bring vacant floorspace and buildings back into use, and deal with the serious problems of dereliction. In total, the scheme would result in estimated £3-4 million worth of investment and regeneration.

  The Middleport Waterfront THI forms part of a wider strategy to regenerate the canal corridors in Stoke-on-Trent. It is envisaged that the THI would act as a catalyst for further investment and regeneration.

  The area covers a number of smaller sites, but also three large building complexes. One of these (comprising the Middleport and Port Vale Mills) is owned by Middleport Environment Centre, a registered charity. Middleport Environment Centre have recently experienced difficulty in obtaining SRB6 funding on grounds of being a trading organisation. The other two major sites, Middleport Pottery and Price and Kensington, are owned by private pottery manufacturing companies and would therefore be subject to state aid restrictions.


  The Middleport area has experienced serious economic and social decline in recent decades. Despite previous improvement schemes, a significant proportion of the housing is in poor condition. Problems of crime, drug use and prostitution have increased. Property prices are well below average against both the city and national contexts. Some terraced housing has recently been marketed for less than £10,000. Typical incomes are well below average, whilst unemployment levels are above average. The index of Multiple Deprivation data makes clear that Middleport is in decline, with serious social and economic difficulties. The Burslem Grange ward, which contains the THI area, ranks as the third most deprived ward of the twenty that make up the City. Overall, Stoke-on-Trent is the 34th most deprived of 354 local authorities measured in England (rank of average of ward scores).

  The Trent and Mersey Canal is a focus for the traditional industrial core of the City, and this is especially apparent in the Middleport Waterfront THI Area where much 19th century fabric has survived. In recent decades, traditional industries have declined, restructured, closed down or relocated to new premises. The lack of investment and neglect of the traditional industrial core has resulted in many buildings falling into disuse. This represents inefficiency in terms of utilising the area's land resources. It has also resulted in a number of buildings falling into dereliction and decay through a lack of investment, and neglect of maintenance and repair. Around 50 per cent of the floorspace in the THI area is currently vacant and much of it has been for several years.

  Demand for property is suppressed and land values are very low or even negative. Poor vehicular access to the canal-side buildings makes it more difficult to identify suitable new uses and attract investment.

  However, it is this very lack of economic activity in the area that has also allowed much of the nineteenth century industrial fabric and character to survive, albeit in poor condition. Paradoxically, the rich concentration of industrial heritage in Middleport is partly symptomatic of the area's decline, and lack of economic activity in recent decades. But this lack of economic activity now threatens the survival of the area's heritage. Investment is urgently required.

  Many companies are struggling for survival in a contracting pottery industry. Many are sympathetic to the conservation of their buildings, introducing new uses and economic activity, and allowing public access. The firms in the Middleport area are managing to survive, but incapable of undertaking significant investment in marginal sites. There is clearly little demand for land and buildings in their current condition. Without substantial public funding, they are not viable, and by a significant margin.

  Cities and towns around Britain have used their historic environments to help create a distinctive identity and competitive advantage. The reason some cities are more able to attract high value investment is linked to the quality and nature of the built environment. Stoke-on-Trent has a limited built heritage resource in terms of quantity. However, qualitatively, it has elements of international importance, especially relating to coal production and pottery manufacture. Stoke's pottery related industrial heritage helps to creative a distinctive identity. The three most important historic pottery sites are Gladstone Pottery (now a public sector museum), Price and Kensington and Middleport Pottery, the latter two being in the Middleport THI area. These two potteries and the other surrounding buildings in the Middleport THI area form a concentration of pottery based industrial heritage, making Middleport one of the richest stretches of canal, not only in Stoke-on-Trent, but also against a national and even international context. Middleport Pottery and Price and Kensington, both privately owned, are at risk until the funding problem is resolved.

  The proposed Middleport Waterfront THI would act as a catalyst, complementing and assisting private and voluntary initiatives, and providing leverage for other funding. The THI could help to spark the confidence and investment that the area needs so badly if it is to prosper once again. The state aid problem currently prevents this.


  Middleport Pottery is a model pottery factory dating from the late nineteenth century, which has survived remarkably intact. This is reflected by the grade II* listing placing it among the top 6 per cent of listed buildings nationally. The site has some 97,000 sq ft of floor space. Around half of this is occupied by Burgess, Dorling and Leigh, a pottery manufacturing business, a remainder is vacant, in need of renovation and at risk. The site was identified as being at risk by the Stoke-on-Trent Buildings at Risk Survey 1998 and English Heritage's Buildings at Risk Register 2001.

  The previous company (Burgess and Leigh) went into receivership in 1999. At this time the receivers put the building on the market. A few potential purchasers informally approached the City Council. However, in each instance the proposal was for complete clearance, or at best retention of only the front facade. When informed of the restrictions on demolition, all interest was extinguished.

  Experience elsewhere in the City indicates that such a building complex if vacant has a life expectancy of only a few years. They become a target for vandalism, theft, fire damage, etc. In Hanley, the City Centre, the large Imperial Pottery Factory complex in the Caldon Canal Conservation Area was recently demolished, having become unsafe. An adjacent factory complex, Hanley Pottery, also in the Caldon Canal Conservation Area, is expected to be demolished in the near future. In the town of Stoke, Colonial Pottery in the Trent and Mersey Canal Conservation Area was recently demolished for safety reasons. All had been vacant for only a few years. Middleport Pottery is comparable to these complexes in scale and character, though in a much less viable location due to poor access and the nature of the surrounding area. In addition, these were all unlisted buildings in conservation areas and there was scope for higher proportions of demolition than at Middleport Pottery.

  The Middleport Pottery building complex, designed for 19th century manufacture, is unsuitable for modern pottery manufacturing techniques or for many alternative uses such as residential without substantial demolition and redevelopment. The site only has value to someone intending to carry out manufacturing using traditional techniques. For anyone else, its value is low and perhaps negative due to the responsibilities imposed by the listing. The suggestion that state aid for the built heritage would distort competition is difficult to understand in such circumstances.

  William and Rosemary Dorling purchased the site with the intention of continuing the traditional manufacturing activities, producing a specialised product rather than mass production. The Dorling's personal resources and borrowing capacity have been fully utilised in this initiative. The company is in profit and has slightly increased its workforce. However, there is insufficient income generation to pay for even quite urgent maintenance. There is no question of the vacant parts of the site being addressed, or even for the decline of the occupied areas to be fully arrested. The available resources for the buildings per annum are in the order of thousands. The estimated cost of fully repairing the site is probably in the order of £1 million.

  The proposal for the site under the THI is to repair the buildings, introduce visitor facilities and provide floorspace for rental at realistic market rates to other small companies. The additional income generated by the new floorspace would be used to fund the upkeep of the grade II* listed factory complex. The THI (HLF and SRB6 funding) would pay for around 60 per cent of the works. English Heritage would contribute match funding. The Dorlings would provide around 5-10 per cent of project costs. The project would provide substantial benefits to the Middleport Area and canal corridor in terms of regeneration, bringing in new jobs, improving the image and dealing with dereliction.


  The Price and Kensington site is an extensive complex of buildings, listed grade II*. Parts of the site were improved under a previous initiative. However, much of the site is in very poor condition and one building collapsed a few years ago, leaving a gap in the site.

  The manufacturing part of the business was recently relocated to new purpose-designed buildings at a nearby site. This resulted in a saving of hundreds of thousands of pounds per year to the company. This illustrates the unsuitability of some of the buildings for modern manufacturing purposes. New uses are required. Half of the floorspace at the Price and Kensington site is now vacant, the other half being used for packaging only. The owner intends to market the site. However, the experience of other sites in the City suggests that without public funding the site may be marketable only on the basis of partial or substantial clearance and redevelopment of the building. The site must be considered to be at extreme risk.


  The understanding of both English Heritage and the Heritage Lottery Fund is that their funding is exempt from state aid restrictions. Factors that may support this view include:

    —  Heritage funding pays for the conservation deficit. Many projects are economically unviable without substantial or even complete funding of capital costs. In addition, conservation projects have to be carried out using appropriate materials and techniques and this has cost implications. The difference between any increase in value of the building and the capital cost of the works is the conservation deficit.

    —  Article 87(2) of the Treaty of European Union refers to aid granted by a member state, which distorts competition by favouring certain undertakings or the production of certain goods, insofar as it affects trade between member states. In the case of grants for conservation works, it could not be considered to distort trade between member states.

    —  Article 87(3)(d) makes provision for "aid to provide cultural and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that it is contrary to the common interest". The THI would appear to be precisely the kind of initiative envisaged under this provision.

    —  The statutory protection of buildings creates competitive disadvantage to the occupying firms and heritage funding merely creates a level playing field;

    —  Statutory protection designates buildings as a "public good" (in economic terms). It is unreasonable to expect private firms to fund public policy.

  In the case of Middleport Pottery, the site is economically unviable. The works will have very limited impact on the value of the site, and such impact would largely be in cancelling the negative value of some of the buildings. The conservation deficit therefore accounts for most of the costs of the project. When the proposed visitor facilities are taken into account (the company allows visitors access to the site at present) these actually place a burden on the company, though this can be offset to some extent by purchases in the shop and proposed café. Some parts of the site, such as the bottle oven and engine room, are incapable of being put into productive use and are simply a drain on the company's resources.

  Heritage funding would be made available for specific and carefully controlled works to repair and consolidate the grade II* listed building. Public access to the site would be a condition of the funding. Essentially the listing of the site gives it the status of a "public good" and the public would have reasonable access to it. Without providing funding to cover the conservation deficit, the State is in effect requiring the company (and other owners of listed buildings) to preserve the asset as a public good for current and future generations (ie to fund public policy).

  The Dorlings clearly have to concentrate their resources on servicing their borrowings and keeping the manufacturing business afloat. Nonetheless, they have a real commitment to preserving the built heritage as a worthwhile aim in its own right. They are committed to conservation for it's own value. Such owners are rare. The will exists, but not the resources. It is simply unrealistic to leave the cost of preserving such sites to private companies. Few companies would have the resources and those that did would be very unlikely to locate in a declining and derelict industrial area.

  It is essential that the problem with funding be resolved. All of the sites in the THI area are at extreme risk until this is achieved. A 20-25 per cent grant (the level allowed to SMEs in Tier 2 areas) could only contribute to very limited and small-scale repairs such as rainwater goods. Unless substantial funding can be channelled to this site, the listed buildings will continue to deteriorate and will be seriously damaged or lost. The THI forms a significant element in the strategy to regenerate Stoke-on-Trent's canals. Limitations to the THI projects would be very damaging to the canal regeneration programme.


  Middleport Pottery provides a very tangible example of a wider problem for Stoke-on-Trent and other areas undergoing industrial decline, rationalisation and restructuring. Much industrial heritage tends to be located in marginal areas based around the traditional industrial core. Such areas are characterised by neglect, dereliction and low levels of private investment. This is certainly the case with the canal corridors through Stoke-on-Trent including the THI area. A very high proportion of statutorily protected industrial heritage is occupied by private companies operating in increasingly competitive and marginal industries. In the past, industrial heritage in Stoke-on-Trent and other industrial cities has required substantial public funding in order to make it viable for repair, refurbishment and continuing or new uses. Such funding has been necessary to cover the conservation deficit, which often covers much of the project costs. These projects often act as a catalyst for wider regeneration.

  The current interpretation on state aid restrictions greatly hampers the potential for public/private partnership to secure regeneration. It effectively brings heritage-based regeneration, and indeed urban regeneration in general involving privately owned land to a halt. The de minimis threshold (100,000 Euros) or 25 per cent (SMEs in Tier 2 areas) limits on funding are in most instances going to be grossly inadequate. This being the case, a large proportion of Stoke's and Britain's industrial and commercial heritage becomes untenable.

  A single currency would further exacerbate this problem. State aid restrictions effectively extinguish the kind of robust regional policy which is essential to assist under-performing areas subject to a Europe-wide interest rate. Without such a regional policy, targeting under-performing areas, cities like Stoke-on-Trent will decline.

  The current interpretation of European State Aid rules undermines the ability of cities like Stoke-on-Trent to secure urban and economic regeneration. The scale of this threat cannot be overestimated. The traditional industrial core will continue to decline with no prospect of securing regeneration or creating conditions to attract private investment. I do not believe it is any exaggeration to describe the current position on state aid as outlined by the DTI as a disaster for Stoke-on-Trent, for Britain's built heritage and for regeneration in general.

  It is difficult to imagine that the Treaty of Rome envisaged the suppression or cancellation of heritage funding. Indeed, the Treaty allows for aid to provide cultural and heritage conservation, as stated above. Nonetheless, the current interpretation would appear to have had the somewhat perverse effect of preventing heritage funding for sites owned by trading companies, except at very low rates. It is highly unlikely that this was an intended outcome at the time the Treaty of Rome was formulated.

  The current interpretation of state aid rules is clearly not sustainable. It is incompatible with the Government's policy on the built heritage and principles contained in Towards an Urban Renaissance. Indeed, the implications are potentially the loss of built heritage at an unprecedented scale and urban stagnation or decline in many areas.

  The current position on state aid has dire consequences for Stoke-on-Trent and similar cities around Britain. In the short term it is will halt many regeneration initiatives involving privately owned built heritage. In the medium to long term, it will cause serious and irreversible damage to the Nation's built heritage, and inhibit the social and economic benefits associated with a well-maintained heritage resource. A solution is required urgently. Whether this is can be found by looking at the interpretation of the existing state aid rules or the rules themselves need to be changed is not clear. What is clear, is that the existing rules and their current interpretation are unsustainable, unworkable and deeply harmful.

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