The £160-million scheme to regenerate Truro’s Pydar district needs an urgent £10-million cash injection from Cornwall Council in order to continue.

The local authority’s Cabinet will hear next week that work on the massive project could become “abortive” if extra funding is not provided to allow it to progress.

The development would see 300 new homes, space for 400 students, cafés, restaurants, nature trails, a hotel and other leisure, hospitality and cultural facilities. There are also plans to create a creative industry hub with Falmouth University, bringing more young businesses and students into the city.

Outline scheme approval was given by Cornwall Council’s strategic planning committee and demolition works have been partially completed. However, Cornwall Council is being asked to provide capital funding to cover costs over the next two years to allow for further design and rephasing work before a full business case back is brought back to Cabinet members.

A report, to be discussed on Wednesday, states that since July 2022 the project has suffered from significant construction inflation and heightened GILT rates [a type of bond issued by the government in order to finance public spending], which have stalled the ability to sign a private finance funding deal.

Changes to the Building Safety Act last year placed additional requirements on residential buildings above 18m, a sudden change from the previous 30m guidance, which means parts of the Pydar scheme will need “an element of redesign”.

“The combination of these two eventualities will delay physical progress on site and result in the need for a re-focus into the delivery strategy and next steps for this important regeneration scheme,” adds the report, written by senior council officers.

It states: “Whilst the project remains viable over the long term, the project requires an underwriting through a loan guarantee and an injection of grant funding by the council to allow progress to the next stage.”

It continues: “The investment of circa £6m to date has made the project shovel-ready and this could easily become abortive if the project does not progress.

“In addition, there is a risk of losing market interest and a delay could impact active negotiations with new businesses to Truro including the university sector, hoteliers, workspace providers and leisure facilities.

“Pydar is now at a critical stage and needs an injection of funds to continue to move the project forward whilst we continue design work and financial negotiations to prevent economic stagnation and long-term project delays.”

The proposed ask for £10m funding over two years will deliver the following:

* Design work, planning process/application and procurement of contractors to deliver the gateway and St Clement Street frontage;

* Continued market negotiations and pre-lets with interested tenants;

* A “context of commitment to delivery” to allow negotiations with Homes England, which has cited three South West schemes - Truro, Plymouth and Bristol - as its current regeneration priorities;

* Review of wider delivery strategy and a positive context for negotiations with university partners;

* Implementation of the new Building Safety Act requirements on existing reserved matters approval for consented blocks and the wider masterplan;

* Legal and procurement fees to enable the progression of the private finance deal for decision to approve;

* Demolition and archaeology works to the remaining assets to remove the financial liabilities these buildings currently incur on the council;

* Surveys and other enabling and infrastructure work ahead of contractor appointment, including placing orders for the new electrical connection from Shortlanesend Sub Station.

The report adds: “We propose to spread the £10m of funding over two years to take full advantage of other potential investment partners, possible future grant and possible reductions to GILT rates and thus minimise the expenditure from the council.”

The Pydar site falls within the 30 per cent most deprived areas in England. The council says the overall scheme will deliver direct growth of £4.6bn in Gross Value Added (GVA – basically, income) to Cornwall, which represents the equivalent of 1.4 per cent of Cornwall’s overall GVA (in 2020).

“For one project to register on the GVA for the region is unique and should be considered in decision making, particularly when the region is committed to growth,” the report stresses.

Progress made over the past 18 months includes demolition work in November 2022; ongoing detail design development for three viaduct blocks and university; engagement with Truro City Council, local businesses and the community; regular meetings with the local planning authority; and works on site including archaeology, utilities diversion work and other surveys.

Procurement of contractors has started, and Falmouth University signed the Heads of Terms to relocate 750 students, making national property news and raising interest from national chains and businesses including hotels, workspace providers and leisure facilities.

Treveth Development LLP has been retained as development manager on the basis that this continues to be delivered as a council-controlled project.