Isles of Scilly ferries £48.4m funding will 'return to treasury'

Plans include a new passenger ferry, Scillonian IV, and cargo vessel (artist's computer-generated image)

Nearly £50m of government money given to provide new ferries for the Isles of Scilly is expected to be returned.

This follows the existing provider, Isles of Scilly Steamship Group (ISSG), signing contracts to privately fund the project.

The government had allocated £48.4m to the Council of the Isles of Scilly to pay for new vessels.

CEO of ISSG Stuart Reid said "we now understand that that money will return to the treasury".

'Decision not made yet'

Shipbuilder Harland and Wolf (H&W) had been hoping to secure the levelling up funding from the government to build and operate its own new vessels.

LISTEN: CEO of ISSG Stuart Reid tells BBC Radio Cornwall about plans for the replacement ferries

H&W boss John Wood said: "We continue to believe that the most sustainable and affordable year-round fares for islanders can only be achieved through utilisation of levelling up funding and fear that residents and businesses will suffer if this once-in-a-generation funding is lost.

"But that is not in our gift, whereas our other plans are, and we look forward to working with the community to deliver faster and more competitive services very soon."

Its other plans include a fast ferry service scheduled to begin later this year and operating within the freight market.

The Scillonian III has taken passengers between Penzance and the Isles of Scilly since 1977 and needs replacing

Isles of Scilly Councillor Steve Sims said "it looks fairly likely" the money would be returned to the government, but "that decision has not been made yet".

There are meetings on Friday and Monday where the details are to be discussed, he added.

He said: "It is a pretty dark day for the islands. We are now going to be saddled with £60m debt repayments over the next 20 years - it is grim."

ISSG said two new passenger and freight ships would be built by French shipbuilder Piriou in Vietnam, to be delivered in 2026.

'Sustainable solution'

The deal "guarantees the long-term future of passenger travel and freight supplies" to and from the islands, the group said.

The formalising of the contracts follows a letter from Michael Gove MP, Secretary of State for Levelling Up, dated 15 January.

The letter to the Council of the Isles of Scilly said "once these contracts are signed, our expectation is that there will be no rationale for the Levelling Up Fund monies to be used to provide vessels for a competing service".

ISSG currently operates passenger and cargo links between Penzance and St Mary's, and said construction on the vessels would begin in spring this year.

Mr Reid said the vessel project team and partners had been working "very hard" to put in place the final elements of a long-term plan.

He said: "Signing these contracts allows us to provide a strong and sustainable solution that meets the travel and freight requirements of the Isles of Scilly for generations to come."

ISSG has taken out a private £33.6m loan to pay for the new vessels.