Cost of living crisis: Surging inflation prompts concerns for planned major new North East music venue backed by software giant Sage

Gateshead Council recently launched a second attempt at securing £20 million of levelling up funding from the government after seeing costs for the huge riverside complex, which will be known as The Sage, jump substantially.

Local authority leader Martin Gannon was quoted in The Times as saying the £300 million scheme could not go ahead without extra funding due to the rising cost of materials, especially steel, and that double-digit inflation was “absolutely disastrous for a construction project”.

Former Newcastle United chairman Sir John Hall also told the newspaper that the huge development must not be left “high and dry”.

But council chiefs have now denied that The Sage, hailed as a “world class” centre that will create 2,000 jobs and bring a £70 milllion boost to the local economy each year, is at risk of falling through.

Officials have indicated to the Local Democracy Reporting Service that, as was the case when the rising building costs were reported by the LDRS in June, that if the council failed again in its bid for a share of the £4.8 billion Levelling Up Fund, then the arena development would have to be redesigned and scaled back – rather than being completely abandoned.

The council said: “The Sage and the Gateshead Quays development have inevitably been impacted by external events which have led to funding challenges.

"A combination of the supply chain recovery from Covid, inflation and the war in Ukraine that has directly affected steel and gas prices as well as the wider energy costs has led to increased construction costs and a degree of uncertainty that has made it extremely difficult for the contractor BAM to confirm a fixed price construction cost."

It added: “Whilst there are challenges that require Government support we are committed to delivering this project to Level Up Gateshead and the North East.”

The development will feature a 12,500-capacity arena that will replace the Utilita Arena, as well as a conference centre, and a hotel – plus new bars, restaurants, public space and walkways along the Quayside.

With software giant Sage PLC having bought the naming rights for the new complex, which is being developed by Ask:PATRIZIA and will be operated by ASM Global, the existing Sage Gateshead music centre next door is set for a name change.

With inflation rising above 10% and warnings it could spiral as high as 18% in 2023, there are concerns that major building projects, which have been key to outgoing prime minister Boris Johnson’s promises to level up neglected areas, will have to be scaled back – or axed entirely.

Northumbria Police and Crime Commissioner Kim McGuinness warned: “If government pull the plug on levelling up projects the gap between the North East and rich southern areas will widen irreversibly. But, levelling up should be about more than buildings, it must be about people, opportunities, pulling households out of poverty.”

There are several other North East projects hoping for success in the second round of the fund, such as the building of a new jetty for the Shields Ferry and a regeneration of Ashington.