Inflation, transaction costs, fundraising, professional fees and a number of financial contingencies have raised the cost from the earlier figure of £275m. The mill, set to be based near Redcar, Teesside, will manufacture newsprint from recycled newspapers and magazines.

Ecco Newsprint chief executive Marcus Moir said: “The project is in good health, and we are continuing to make progress. We are looking at new kit, completing the fundraising and finalising the construction site.”

Planning permission was received from Redcar & Cleveland in spring 2006, and the fundraising process
is expected to be completed later this year, once the civil engineering contractor has been selected.

Around 170 jobs could be created at the new site, as well an estimated 1,000 in spin-off operations.

Further backing may come from Waste Resources Action Programme (WRAP), which is considering making a contribution. Ecco is currently backed by banking institutions and the development team of private investors.

The site will include a recycling plant, pumping and electricity sub-station.