Council bosses insist a new arena and conference centre on the Gateshead Quayside will be built - despite fears an inflation crisis could put an end to critical projects across the country.
Gateshead Council recently launched a second attempt at securing £20m 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 on Tuesday (30 August) as saying the £300m 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 million 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.
Gateshead 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."
They added: "The council has submitted a £20m Levelling Up Fund (LUF) Bid Round 2 to Government to support the project, which should it be successful will be utilised to support key objectives of the scheme.
"This will support Net Zero and digital infrastructure, critical to competitive business and leisure offers that enable the North East and UK to flourish on the world stage.
"This includes supplying heat from minewater and solar power; a local SME visitor showcase; and trialling innovative digital visitor experiences.
"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, a conference centre, and a hotel.
There will also be new bars, restaurants, public space and walkways along the quayside.
With Sage PLC having bought the naming rights for the new complex, the existing Sage Gateshead music centre next door is set for a name change.