The company said it expected the total cost to build and commission the plant to be around 15-20% lower than the top estimate of £500m, despite the current recession and a contraction in the newsprint industry,

Chief executive Marcus Moir said: "We are continuing with our fundraising through what is a very difficult period with the financial market as it is.

"However, despite this we are making positive progress and the overall cost has come down because of savings in the cost of building and equipping the plant. The market need is there and we have been very well supported by customers and supply partners."

He added the savings would "substantially assist" what the company is trying to do with funding, although he said it was a slow process.

Ecco Newsprint was formed in 2004 to finance and operate a high-speed newsprint production facility based on recycled raw material.

It will be built at Wilton International industrial park in Teesside and, once up and running, will produce 400,000 tonnes of newsprint per annum using recovered waste materials as raw material.

Newsprint made from recycled fibre requires less energy to produce than newsprint made from virgin fibre, according to the company. Ecco said it would use around 1MW of electricity to produce 1 tonne of fibre – compared to 2.8MWs for paper made from virgin fibre.

However, Moir said: "There will continue to be a switch towards modern technology and recovered fibre, which is the way the market is going."