Paper Mills: Asset Opportunities

Introduction

UK paper mills remain a significant contributor to the UK economy, with 54,000 people currently employed in the manufacturing of paper and paper products. As the industry continues to evolve, it is vital that paper mill owners have a proactive strategy to optimise their property assets.

In cases where paper mill sites are no longer fit for purpose, their specific characteristics can offer unique opportunities and challenges for determining the exit strategy. Proposals typically need to take account of economic considerations - such as the impact on local communities - collaboration with the public sector and an understanding of the staged process to achieve long-term viable redevelopment and a suitable divestment for the landowner/ operator. This requires a comprehensive understanding of the associated risks, such as contamination.

Below, we consider some of the options and points to keep in mind when assessing the potential for selling/evaluating a paper mill and specifically, the underlying redevelopment opportunities/constraints relative to alternative uses such as residential or wider commercial.

The characteristics of paper mills

• Water: paper mills often benefit from proximity to water sources such as canals and rivers, which can be a very attractive feature for residential development. They may also have borehole extraction rights. This access to water sources may be highly beneficial for data centre cooling requirements, and also for some larger industrial users, especially if the flood risk is low.

• Power: the paper industry is energy intensive, and many mills have invested in combined heat and power (CHP) facilities (either gas- or biomass-fired). In addition, paper mills can often receive a high capacity of electrical power from multiple sources and can export electricity back to the grid, with large inbuilt electrical infrastructure. This offers a strategic advantage for most types of redevelopment, particularly in areas where there is a severe shortage of power availability into the grid.

• Brownfield locations: paper mill assets and their associated land have the potential to support the growing emphasis on sustainable redevelopment. The scale of these sites can enable independent schemes or form part of wider schemes meeting housing or employment needs. However, it is important to account for environmental liabilities when selling sites, such as contamination from harmful chemicals, and ensure appropriate remediation from specialists. Compliance with Integrated Prevention Pollution Certificates (IPPCs) is essential, requiring engagement with environmental agencies and other local authorities.

• Sale to a trade buyer: the paper industry is broadly saturated, so there is a limited market for virgin paper mill uses. However, other manufacturers involved in, for instance, packaging or recycled paper, could be suitable.

• Plant and machinery: partnering with industry experts ensures that the value of the equipment is maximised through reselling or repurposing.

• Planning: paper mill sites can offer various development opportunities, as mentioned above, that align with local requirements. For historic buildings, this could mean preserving the original structure and repurposing it for other uses. Old mills often find new life as homes or industrial space, bringing benefits in utilising embodied carbon and unique heritage features that provide sought-after character.

• Mitigating economic dislocation: site closures need to be managed sensitively, and it is important to identify the opportunities that will restore economic activity in a community.

• Suitability of uses: paper mills, in particular ‘historic’ assets, are often located in areas which are no longer suitable or desirable for industrial production due to connectivity constraints and surrounding - often residential - uses. 

• Public sector collaboration: local, regional and national authorities will sometimes intervene to support existing uses because of the potential economic impact. Where the case for retained use is weak, the focus can shift to partnering with public sector organisations and other stakeholders to consider the alternative employment opportunities of the site and to access grants and appropriate funding to help make redevelopment viable. 

About Carter Jonas

Our team has extensive experience with paper mills in the UK and across Europe, covering valuation, development consulting, agency (disposals), planning as well as energy and waste related matters. Through our network of partners, we also work closely with experts covering environmental, plant and machinery.

Depending on the type of the optimised end use for redundant paper mills, we can determine the delivery strategy and the appropriate exit point for the landowner which will depend upon:

• The appetite for development risk of the landowner.
• How much ‘value’ the landowner can add through historic site knowledge. 
• The type of buyers, both those who would develop out a scheme and those with the expertise to add value through securing planning permission for a concept.