Almost £40m has been awarded to two major Tyneside regeneration schemes.

The Government announced the winners from a third round of its Levelling Up Fund (LUF) on Monday lunchtime. They include a project to protect the future of industry based on the northern bank of the Tyne and to revitalise South Shields.

The Department for Levelling Up, Housing, and Communities (DLUHC) has awarded £20m to South Tyneside Council to back “transformational” projects aimed at boosting footfall in South Shields. They involve a redevelopment of the Customs House and creation of a “cultural quarter”, relocating South Tyneside College into South Shields town centre, and opening a visitor and education centre at the Holborn Renewable Energy Network.

Newcastle City Council will also be given £19.4m to invest in a “restoration facility” which it says will safeguard thousands of jobs on the riverside. The investment will see a new reservoir constructed at Bill Point in Walker to hold sediment dredged from the bed of the Tyne, ensuring that the berths on the banks of the river can remain accessible to vessels used by the offshore and subsea industries based there.

Council bosses said the move would also allow for the safe deposit of dredged materials containing high levels of heavy metals, which would otherwise be taken to landfill in a “prohibitively expensive and environmentally damaging” process.

Previous North East winners from the LUF have included projects to build a new leisure centre in West Denton, upgrades to the Grainger Market and the huge plans for a new arena and international conference centre on the Gateshead Quayside. However, all of those projects have been hit by serious delays and there have been major concerns nationally about whether LUF-funded schemes will be able to go ahead as planned.

Just last week, the National Audit Office revealed that just £900m worth of the total £10.6bn handed out through the LUF, UK Shared Prosperity Fund, and Towns Fund since 2019 has actually been spent by local authorities. The setbacks have been blamed on a series of factors including rising costs as a result of inflation, a shortage of skilled workers and delays in Government decision-making.

South Shields MP Emma Lewell-Buck said her constituency had been “continually overlooked” in previous funding rounds. She added: “Since we originally placed the bid in 2022, the Government's cost of living crisis has led to inflated prices affecting project costs. I will therefore ensure that the Government works with us to guarantee our plans remain deliverable.”

South Tyneside Council leader Tracey Dixon said the new investment would “boost the economic and social recovery of South Shields”, while Customs House executive director Ray Spencer added that the development would “join up and revitalise the riverside”.

Welcoming the boost for the Tyne restoration facility plans, which will be topped up with £6.6m match funding provided by the North East Local Enterprise Partnership and North of Tyne Combined Authority, city council leader Nick Kemp said: “This is fantastic news for our region and for our important Tyne-based industries. Ship-building is an iconic part of our industrial heritage associated with the River Tyne and today the area has evolved into a global hub for offshore renewable energy manufacturing.

“This investment will help to secure the long-term future of this sector, safeguarding thousands of jobs, helping to create new opportunities and supporting work being done to improve the river environment.”

The successful projects in the third round of the LUF were made up of bids that had not won money in the second stage, rather than being from a new bidding process.