A £3.5 million flagship office building is to be created on Barrow Island in the hope of luring companies involved in the shipyard supply chain.

The project to create a huge two-storey “gateway” office building at the Waterfront Business Park has been part-funded following a successful council bid for European funding.

European regional development funds totalling £2.3 million will go to the project with the rest being met by Barrow Borough Council, who will charge rents to recoup its investment.

The building, with open views across Walney Channel, will go on Harding Rise, a new area of the redeveloped docklands, accessed off Ramsden Dock Road.

Council officials have welcomed the project and formally appointed contractors, Cumbrian-based Thomas Armstrong Construction, to start work in the New Year.

The Barrow area has been found to have a “recognised need” for new, high quality, modern office space to allow firms to move in or expand their existing operations.

Barrow council executive member, Brendan Sweeney, praised the new build project as “excellent” news for the area.

He said: “I think it’s excellent that we have got another big set of office accommodation on the way. We need this type of high-quality, modern office space ready and available if we want firms to move in. The size of this is big. I think the offices in Furness House are about 11,000 square feet and this is 16,000 square feet.”

Coun Sweeney (Lab, Parkside) said: “Sixty per cent of it is paid for from the ERDF and that makes it commercially viable from a council point of view. The rents off it will give the council an income.”

Council executive director Phil Huck said the building would go up on a former brownfield site which had been “remediated” by Cumbria County Council as part of the waterfront development.

Mr Huck told a meeting at the town hall: “Although we are getting funding from the ERDF, there is still a risk to the council. It’s all right building new offices but we have to get them occupied. That’s why we are working closely with BAE Systems to try and find tenants that form part of their supply chain.”

Council leader David Pidduck (Lab, Hindpool) acknowledged it was a “risk” but said the town had to be ready for interest in the Waterfront site.

“It is no good a company coming here and us turning around to them and saying if you can wait two years we’ll have a site ready and offices for you. It needs to be there and done.”

The bid for EU funding was granted because the development helps towards towards the economic growth of Furness.

A report before councillors said: “The intention is for the development to act as a gateway building to the Waterfront Business Park and provide a catalyst for further development on the wider business park area. The new office building will provide managed business space together with associated access road and parking at the Waterfront Business Park.”

Planning permission was granted in March.