Government to get ‘guiding principles’ for investing in private industries

Guiding principles for Scottish Government investment in private industries are to be published after a string of high-profile and expensive business failures, the government’s Economy Director has said.

The Government is “finalising” the guidance for when to invest in private businesses at risk of collapse, with intervention required as a last resort when “all forms of other options have been exhausted”.

The Director-General for Economy, Liz Ditchburn, told MSPs the new guidance will instruct the Government to consider the strategic, economic, commercial, financial and management cases for any investment.

Asked by Graham Simpson MSP about the “massive amounts of taxpayers’ money” effectively lost in high-profile failed investments, Ms Ditchburn said there were three categories of Government investment in the private sector: supporting companies in crisis; “proactive investment for growth” and reactive, policy-driven interventions such as BiFab, Prestwick Airport and Ferguson Marine.

Giving evidence to Holyrood’s Audit Committee, Ms Ditchburn said the decision to nationalise the Ferguson Marine shipyard in Port Glasgow in 2019 was “very much driven by a contractor failure” after the firm went into administration.

The building of two ferries commissioned for CalMac’s Arran, Skye and Outer Hebrides routes have been subject to repeated delays and will cost the Government more than twice the original £97m fixed-price contract.

On the investment in BiFab – more than £37 million of equity and loans – Ms Ditchburn acknowledged “that has not worked out as hoped”.

The fabrication yards, part-owned by the Scottish Government, were put into administration having failed to win contracts to build platforms for offshore wind turbines.

Ms Ditchburn said the Government’s purchase of Prestwick Airport, which it is now attempting to sell, was a “very, very different case” and told MSPs it was “a very strategic asset for the whole of Scotland”.

“These cases are all very different and I think they’re driven by very different things,” she said, adding that there wasn’t a “blanket set of reasons around private investment”.

But the development of the new principles will be incorporated in the Government’s Scottish Public Finance Manual (SPFM) “which will again help guide the kinds of decisions that governments need to take,” Ms Ditchburn concluded.

At First Minister’s Questions last week, Nicola Sturgeon defended her “activist Government” for trying to protect jobs by investing in businesses close to collapse.

The First Minister was challenged by Scottish Lib Dem leader, Willie Rennie, about the Government’s “wasted” money investing in BiFab and an aluminium smelter and power station in Lochaber.

Mr Rennie said: “Five years ago, the First Minister went to the smelter, had her photograph taken and said it was boom time.

“She had her picture taken outside BiFab, backed by tens of millions of pounds, but that didn’t work out either.

“Five years ago, she had signed a deal and had another photo with the Chinese Company, SinoFortone. It was worth £10 billion she said.

“Lots of selfies, lots of taxpayers’ money, no new jobs.

“How much money has been wasted? the Government gave a 30-year guarantee allowing a private company to take a profit but did not create the promised jobs.

“I think the public and the workers deserve an explanation.”

Ms Sturgeon replied: “These are the choices governments have to make because the alternative to trying to work with companies to secure the future of industrial sites or plants to secure jobs … is to let these places go to the wall there and then.

“And then there are no jobs and there are no opportunities and there are no prospects for the future.”

She added: “Yes, BiFab struggles and we have a long way to go, but the alternative to the work we did back then was just to let BiFab, there and then, go to the wall.

“Prestwick Airport is the same; the investments that we have had to make there have protected jobs and although it remains difficult and remains challenging, the only alternative is simply to give up on these things, to give up on the jobs, to give up on the economic prospects and to say there’s nothing Government can do.”