A multi-million pound city deal to support more affordable homes in Aberdeen’s should be agreed as a matter of urgency, first minister Nicola Sturgeon has told prime minister David Cameron.

In a letter to Mr Cameron, the first minister confirmed that the Scottish Government would fund the deal on a 50:50 basis, paving the way for massive investment in innovation, digital connectivity and infrastructure across the region.

Ms Sturgeon has called for a tripartite agreement between the Scottish and UK governments and the local authorities to be struck as soon as possible to ‘send a strong and unequivocal signal’ of support to the city and the wider region given the difficulties being faced in the oil and gas sector.

Local councils say the Aberdeen City Region Deal would help them build more affordable homes and improve infrastructure.

In a letter to Mr Cameron, she said: “The City Deal provides a good opportunity to signal our respective governments’ support for the region.

“Against that backdrop, I am supportive of moving as soon as possible to agree the Aberdeen City Deal.

“Given the current situation in Aberdeen, with significant private-sector job losses announced in recent weeks by the oil and gas industry, it is vital that government sends a strong and unequivocal signal that it is fully supportive of the region’s position as a global oil and gas hub.

“The City Deal provides a good opportunity to signal our respective governments’ support for the region.

“Against that backdrop, I am supportive of moving as soon as possible to agree the Aberdeen City Deal.”

Secretary of State for Scotland, David Mundell, said: “UK City Deals are a UK government initiative to target significant investment to boost local economic growth.

“We have seen already how effective they are in cities and communities right across the UK.

“The UK government has been leading discussions with the Scottish government and other partners on a UK City Deal for Aberdeen.

“We are committed to doing all we can to support the oil and gas sector and the wider north east economy.

“I am delighted that the Scottish government has committed to join us in contributing funding, adding to that already pledged by the UK government. We expect to be able to announce the full details of the Aberdeen City Deal shortly.”

He added: “This is an excellent example of the UK and Scottish governments working together for the benefit of Scotland.”

Aberdeen City Council leader, Councillor Jenny Laing, added: “We have always felt that we had a very compelling case for a City Region Deal for Aberdeen and it is encouraging to hear the positive supprtive comments from the Secretary of State for Scotland and the first minister today.

“Our officers have been working closely with our colleagues in Aberdeenshire, the private sector and the UK and Scottish governments and have held joint negotiations on detailed proposals for investment in innovation, internationalisation, digital connectivity and infrastructure.”

The full text of the first minister’s letter is below:

Dear David,

As you know, our respective officials have been discussing city region deals for Aberdeen and Inverness. I welcome this engagement and the opportunity to support each of our city regions to make an optimum contribution to both the Scottish and the UK economies.

Given the current situation in Aberdeen, with significant private sector job losses announced in recent weeks by the oil and gas industry, it is vital that Government sends a strong and unequivocal signal that it is fully supportive of the region’s position as a global oil and gas hub. The city deal provides a good opportunity to signal our respective governments’ support for the region. Against that backdrop, I am supportive of moving as soon as possible to agree the Aberdeen city deal.

Proposals include plans to consolidate the region’s global reputation in the oil and gas industry. A new innovation hub will support Aberdeen make the transition from an operations base to a global centre for technology and R&D investment and anchor the oil and gas industry as a major success story for the Scottish and UK economies now and in the years to come. This deal will also pave the way for diversifying the economy, building on existing strengths in biopharmaceuticals, agri-food and drink.

Digital connectivity, supporting the Nigg Harbour expansion, investment in housing and transport will also all play an important role in supporting and growing the economy of Aberdeen city region for the future. Key industry players, led by Opportunity North East, have endorsed these proposals as the surest way to secure the region’s economic future.

As was the case with Glasgow and the Clyde Valley, I am prepared for the Scottish Government to fund the deal on a 50:50 basis and to work with you, as a matter of urgency, to bring this to fruition. As a sign that both ourselves, your government and the local councils are doing all we can to address the issue, proceeding to a tri-partite agreement as soon as possible would be welcome.