Greensill Collapse Puts Scottish Government Deals under Scanner
Scotsman reported that Scotland may have to bear the economic brunt of Greensill’s sudden collapse and vital industries, jobs and public finances in Scotland could be at risk. GFG, the firm cited in Greensill’s 2018 pamphlet, was its biggest client by far, with credit facilities running to several billion pounds and now Mr Sanjeev Gupta is attempting to refinance the business. If he fails, Scottish taxpayers could pay a hefty price. Under the terms of that deal, which saw GFG buy the Lochaber plant in December 2016, the Scottish Government made a 25 year long guarantee to buy power it generated in the event the smelter shut down. The precise details of the guarantee remain unknown, with the government stating that it cannot disclose its total gross liability due to commercial confidentiality. Even at a conservative estimate, the total bill to the public purse could be in the region of GBP 575 million.
Ministers deemed such a guarantee crucial to facilitating GFG’s purchase of the plant from Rio Tinto, viewing it as a necessary obligation in order to protect rural jobs, and create critical mass for a sustainable steel production sector. But the precariousness of the arrangement was, and continues to be, keenly felt by those in government. A summary of an August 2017 meeting between First Minister Nicola Sturgeon, Fergus Ewing, cabinet secretary for the rural economy, and Mary McAllan, the government’s director of economic development, warned that the government had reached the very limits of what was possible. The briefing, released under Freedom of Information legislation, also noted the potential to be overexposed to one company, a company that we know is on an aggressive expansion drive elsewhere.
Now, Scotland on Sunday has learned that the previous month, the Scottish Government hired Deloitte to provide expert independent financial advice in relation to the various conditions, undertakings and monitoring requirements of the guarantee and reimbursement agreement between it and GFG’s Lochaber subsidiary. The purpose of the advice, according to government documents, was to ascertain the ongoing financial stability of the firm, and ensure the government received timely notification of key risks so that it could make effective decisions about its guarantee exposure. If at first sight, the hiring of Deloitte appeared to be prudent bookkeeping on the part of ministers, it seems anomalous given that only the year before, they had hired EY, another of the Big Four accountancy firms, to scrutinise the proposed deal with Mr Gupta.