~GBP 50 million (~USD64M/~EUR60M) in government funding earmarked for new ferries to serve the Isles of Scilly is anticipated to be returned, following the Isles of Scilly Steamship Group (ISSG) entering into contracts to privately finance the project.
The government had allocated GBP 48.4 million to the Council of the Isles of Scilly to cover the costs of acquiring new vessels. ISSG's CEO, Stuart Reid, stated that they now anticipate the return of this allocated funding to the treasury.
Shipbuilder Harland & Wolf (H&W) had sought government funding (known as leveling up funding) to construct and operate its own vessels. John Wood (the head of H&W) expressed concern that the loss of this funding could impact residents and businesses, asserting that sustainable and affordable fares for islanders rely on the utilization of leveling-up funding.
H&W's plans also include the introduction of a fast ferry service later this year, focusing on the freight market.
Isles of Scilly Councillor Steve Sims indicated that the return of the money to the government seems likely, though a final decision has not been made. Meetings are scheduled for Friday and Monday to discuss the details.
The Isles of Scilly face a challenging financial outlook, with an anticipated GBP 60 million in debt repayments over the next two decades. ISSG announced that two new passenger and freight ships would be constructed by French shipbuilder Piriou in Vietnam, with delivery expected in 2026. ISSG emphasized that the deal secures the long-term viability of passenger travel and freight supplies to and from the islands.
The formalization of contracts follows a letter from Michael Gove MP, Secretary of State for Levelling Up, dated January 15. The letter stated that once the contracts are signed, there would be no rationale for using Levelling Up Fund monies for a competing service.
ISSG, to finance the new vessels, has secured a private loan of GBP 33.6 million, and construction is set to commence in the spring of this year.