John Ferry John Ferry

The SNP’s foray into high finance has come at a big price

(Getty images)

In a refreshing twist for Scotland’s party of government, the latest potential scandal facing the SNP administration does not involve allegations of sexual misconduct, but rather high finance.

Earlier this week, finance company Greensill Capital filed for administration. Greensill specialised in supply-chain finance, which involves acting as an intermediary to raise money on the back of payment commitments between companies and their suppliers. Greensill’s innovative financing arrangements were instrumental in metals tycoon Sanjeev Gupta’s rapid expansion of his business empire, including his 2016 acquisition of an aluminium smelter at Lochaber in the Scottish Highlands, plus two nearby hydroelectric dams.

Companies within Gupta’s GFG Alliance group bought the industrial assets from Rio Tinto for £330 million, but the deal was achieved on the back of the Scottish Government providing a 25-year guarantee on purchasing power from one of the hydroelectric sites if the smelter shut down. The key to unlocking finance came from understanding the value in this type of asset – not the industrial assets, but the guarantee of a string of payments long into the future.

To say that Scotland has an industrial policy would be wrong

Greensill was able to take that guarantee and sell bonds worth hundreds of millions of pounds on the back of it. Estimates put the value of the guarantee at over half a billion pounds.

But despite all that money raised, the new wave of jobs promised with the deal have failed to materialise. In March 2017, Scottish Government rural economy secretary Fergus Ewing said the deal would create up to 1,000 direct and 1,000 indirect jobs, bring a billion pounds into the local economy and spark ‘an economic revival in these Highland communities’.

That has not happened. A proposal to build an alloy wheels factory has been ditched, and there is now talk of far less ambitious plans for aluminium recycling and water canning.

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