Inflation costing City Deals £35m a year, watchdog says

Delivery of Northern Ireland's City and Growth deals has been slower than anticipated and inflation is reducing their real value by more than £35m a year, a spending watchdog has warned. The deals are regeneration funding packages worth more than £1.5bn, with about £600m coming from UK central government. The funding is a fixed amount meaning that the longer it takes to spend, the more the real value is eroded by inflation. The NI Audit Office said inflation is a 'challenge to the successful management of ongoing deal project development and delivery.' Four deals across NI There are four deals: Belfast City region, Derry City and Strabane, Mid South West region and Causeway Coast and Glens. The Belfast deal was first announced in 2019 and was formally signed off in December 2021. Only it has projects which are actually operational, while the Mid South West (MSW) deal has not yet been formally signed and its governance arrangements await final approval. The Audit Office found that by 31 March 2025, less than 5% (£58m) of the central government capital funding had been used across all deals. This is forecast to rise to only 8.5% (£113m) by March this year. Each deal is supposed to be delivered over a 15 year period with the Audit Office warning that time constraints could potentially place funding at risk. It said this issue is 'not currently recognised and formally managed as a strategic risk across deal risk registers, despite a potential risk to funding if delivery does not accelerate.' The report also raises concerns about the long term financial sustainability of deal projects. The deals cover construction and set-up costs but the project promoters, typically local councils, must underwrite future operational and maintenance costs. There is a strategic risk that these long-term financial commitments may become unsustainable. Slow progress The Auditor General Dorinnia Carville said the deals represent a positive example of collaboration between central and local government. However she said it was too early to make a judgement on whether they would provide value for money. 'Progress remains slow, with much of the available funds remaining unutilised. 'Continued delays are eroding the value of this potentially transformative investment,' she added. 'There is a risk that potential benefits will not be maximised. 'Given the significant public investment committed, my Office will continue to closely monitor both the ongoing delivery of City and Growth Deals, and the action taken in response to the recommendations made in today's report.' The Mourne Gondola It was hoped the Mourne Mountains Gateway project would be a game changer, but last year plans to develop it failed for the second time. The project was expected to cost £44m, with £30m coming from the Belfast Region City Deal and the remainder from Newry, Mourne and Down District Council. Initially planned for Slieve Donard in Newcastle, the project was moved to Kilbroney Park in Rostrevor in May after the National Trust, which owns land on Slieve Donard, refused to grant a lease. In July 2025, the Department of Agriculture, Environment and Rural Affairs said it would not be allowing the council to use land it controls (via the Forest Service) at Kilbroney. Since the gondola project did not work out, the council submitted an alternative project for a new tourism trail which will link Strangford Lough and Carlingford Lough through a number of forest and country parks. That plan is currently out for consultation with tourism businesses and stakeholders. Concerns over north west projects This week, a report from Derry City and Strabane District Council raised their own concerns over two city deal projects. It said Ulster University (UU) had paused the appointment of a design team for a new School of Medicine building pending 'confirmation of budgets and sustainable funding provision.' The expansion of the medical school is one of the signature projects of Londonderry's city deal. The report also said UU could not accommodate a proposed digital innovation hub and said that project was now in 'considerable delay'. In June, a Stormont official said a target to reach 10,000 registered students at UU's campus in Londonderry by 2032 was 'under review'. What has the government said? A spokesperson for Stormont's Department of Finance said it will 'consider the report's recommendations'. It added that the deals are designed to be delivered over 10-15 years and as they progress 'the deals will drive economic growth, create more and better employment opportunities'. 'The department remains confident these objectives are and will be delivered on.' A UK Government spokesperson said that although delivery remains with the NI Executive and local councils, it 'remains in close communication with partners'. It added that it 'is committed to ensuring the benefits of this significant investment in the City Deals are felt as soon as possible'.