Meeting of the Parliament (Hybrid)

Meeting date: Wednesday, March 24, 2021

Official Report 1047KB pdf

---

Greensill Capital UK (Administration)

Right—back to normal. The next item of business is a statement by Fergus Ewing. The cabinet secretary will take questions at the end of his statement, so there should be no interventions or interruptions.

15:50  

My statement concerns the administration of Greensill Capital UK Ltd and its implications for businesses in Scotland. At the outset, I emphasise that the subject matter concerns sensitive commercial affairs, so I will be careful in my remarks and in answers to members’ questions, in order to avoid saying anything that might breach commercial confidences or cause harm. I hope that members, too, might recognise the sensitivity of the situation and the reasons for my caution.

Greensill Capital is a United Kingdom headquartered financial services company that specialises in supply chain finance, working capital solutions and securitisation. Greensill Capital also has operations in the United States, Germany, Australia, Singapore, China, South Africa and the middle east. The last full audited accounts of Greensill Capital UK for the year to 31 December 2019 show revenues of $420 million and total assets of $682 million. More recently, the business has faced financial difficulties, and on 8 March, joint administrators from Grant Thornton were appointed to Greensill Capital UK.

Although Greensill Capital has no base in Scotland, the reverberations of its administration might still be felt here. At this stage, reliable information on the extent of Greensill’s operations—the range of companies that it financed and the financial exposure of creditors—remains unclear. A more substantive picture should emerge over the coming weeks, as the administrators assess Greensill’s state of affairs and prepare a statement of proposals for creditors.

In the meantime, certain wider commercial repercussions of the Greensill administration have begun to surface. For example, it is clear that the Gupta family group of companies, known as GFG Alliance Ltd, has been impacted. GFG Alliance is a large multinational company with more than 35,000 employees, operating from some 270 sites in 30 countries around the world. In Scotland, GFG owns several businesses, through Liberty Steel Group Holdings UK Ltd, Alvance Aluminium Group and SIMEC Energy group. Those groups operate the Dalzell and Clydebridge steelworks, the Lochaber aluminium smelter, the hydroelectric power station at Fort William, Jahama Highland Estates and Shand Cycles Ltd. Some of those businesses have received public sector support.

Across other parts of the UK, the GFG Alliance is prominent in the steel, engineering and energy sectors. For example, Liberty Steel UK is Britain’s third-largest steel producer and employs nearly 3,000 people at 11 sites across England, Scotland and Wales.

I spoke with Sanjeev Gupta, who is the executive chairman of GFG Alliance, last Thursday. He was open about the challenges that are posed by the collapse of Greensill, but he also emphasised the underlying operational health of GFG’s Scottish operations. He indicated that market demand is strong and that metal prices are currently among the best in more than a decade. Hence, GFG’s Scottish steel and aluminium businesses are presently on a profitable footing, according to Mr Gupta, who told me that the group has adequate funding for its current needs while it progresses refinancing. Nevertheless, he confirmed that stabilising the finances of the GFG Alliance in the near term is important to its future activities, including those in Scotland.

On Monday, I spoke with the trade unions that represent GFG workers in Scotland—GMB, Unite and Community. They expressed a very positive picture of the current strong markets in metals, and of the strategic value in retaining the skills and industrial capacity in those operations, which are needed for the transition in Scotland to a low-carbon economy.

Members of the Scottish Parliament—in particular, those who have constituency interests—will, rightly, want to be kept up to date. That is why I was keen to make my statement and take questions before the election recess. I also undertake to update members further, as required by circumstances, throughout recess. I assure members that officials are engaging regularly with the business at local and national levels and through a ministerial task force. We are monitoring the situation closely.

I have information to provide about GFG’s footprint in Scotland, the public sector support that has been provided and the economic return. Liberty Steel Dalzell Ltd is the recipient of a Scottish National Investment Bank loan of £7 million. The Dalzell plant recommenced steel production in late 2016, having been mothballed by its previous owner, and the loan facility was agreed in March 2017. According to information from the business, at the end of the 2020-21 financial year Liberty Steel Dalzell will have invested over £18 million to make Dalzell operational and to enhance its capability and its product portfolio.

In the five years since reopening in 2016, Dalzell will have produced and sold over 300,000 tonnes of heavy plate steel. Sales to domestic and international markets have generated more than £163 million in revenue. Perhaps most important is that Dalzell currently employs 140 workers, including 3 apprentices, thereby retaining vital industrial skills and supporting livelihoods.

In autumn 2016, the Government intervened in support of continuing aluminium production in Lochaber. The Fort William smelter is of huge significance, as it is the UK’s last remaining smelter. Its current production capacity is 48,000 tonnes of aluminium per year. The complex has been operational for more than 90 years and remains a major source of employment in the west Highlands.

In 2016, Scottish ministers sought Parliament’s permission, through the Finance and Constitution Committee, to provide a guarantee of the smelter’s power purchases. The committee reviewed and approved the contingent liability. Our support, which we offered to any bidder with plans for long-term industrial operations of the Lochaber businesses, prevented break-up of the assets and closure of the smelter. The amounts that are guaranteed by the Scottish Government are published in its consolidated accounts; they vary between £14 million and £32 million per annum over the 25-year life of the guarantee.

Members may be interested in the economic return. According to information that has been provided by the business, GFG has created 40 new jobs in Lochaber since 2016, which has increased total employment in the complex to 200 jobs, currently. Payroll and pension contributions that have been generated from that employment total over £41 million. Spending with suppliers, including many local businesses, has exceeded £34 million since GFG’s acquisition. Those income flows are the very life-blood that sustains communities and supports a large and valuable supply chain with hundreds of associated jobs.

In conclusion, Presiding Officer, I remind members of the sensitive commercial nature of the issues arising from the administration of Greensill Capital (UK) Ltd. Its collapse has clearly caused difficulties for a range of businesses, so we must tread carefully in order to avoid fuelling harmful speculation. We in the Government will continue to do everything in our power to support Scotland’s steel and aluminium sectors and their highly-skilled workers. Our actions will always be motivated by the desire to protect and create jobs, and to protect strategic industrial assets and foundational sectors on which additional supply chains and jobs rely.

As ministers, we are accountable for the decisions that we take. I assure Parliament that, when we have intervened, substantial due diligence has been undertaken and appropriate measures put in place to protect, and minimise the exposure of, public funds.

No industrial intervention is without risk, but I believe that we have struck the right balance. We have supported and enabled shorter-term and longer-term industrial and economic objectives. We are mitigating risks as far as we can. Critically, we have kept Scotland’s steel industry, we have kept our only aluminium smelter open and we are keeping people in skilled work.

The cabinet secretary will now take questions on the issues that were raised in his statement. I will allow about 20 minutes for questions, after which we should move on to the next item of business.

I welcome the statement, which we have been calling for, and I thank the cabinet secretary for advance sight of it. There has been considerable media speculation about the future of the GFG group, given the financial issues that are affecting Greensill Capital and what that means for the enterprises concerned in Scotland and the rest of the United Kingdom.

It is encouraging to hear from the cabinet secretary that the GFG group believes that the underlying businesses are viable. What assurances can he give us, therefore, about the future of the workforces at Dalzell, Clydebridge and Fort William? The cabinet secretary says that Mr Gupta believes that the businesses are healthy, but has the Scottish Government done anything itself to have that independently verified, rather than just relying on Mr Gupta’s word that that is the case?

Secondly, there are public moneys at stake. The Government has a poor track record of investing public funds—I am thinking of Burntisland Fabrications Ltd, Ferguson Marine Engineering Ltd and Prestwick Airport Ltd. It has been suggested that the total guarantee from the Scottish Government is close to £600 million. Is that figure correct? How does the Scottish Government assess the overall risk to public funds today in the event of a financial collapse of the GFG group?

I can assure Mr Fraser that continued operation of the smelter and the steelworks are foremost in our objectives. I made that absolutely clear when I met trade union representatives on Monday, when we had an extremely useful discussion. In that discussion, they shared with me their view that the workforce in both plants are optimistic and confident about the future ability of the plants to operate successfully. We have been advised that the aluminium smelter at Fort William has been trading profitably. Mr Fraser asked what independent analysis we do of that. We receive regular information, which our officials share and discuss with our professional advisers, as Mr Fraser would rightly expect.

As he was a member of the Finance and Constitution Committee that approved the guarantee—along with colleagues in his party and other parties, as was right and proper—Mr Fraser should be aware that in order to provide mitigation of and protection against risk, we obtained appropriate securities, including security over the smelter and the hydroelectric station. I confirm that those are very valuable assets and that, although the security value is commercially confidential, it is very significant indeed.

We took that action to avoid the loss of a steel industry and of the only remaining aluminium smelter in Britain. If we had not acted, they would have closed.

I, too, thank the cabinet secretary for advance sight of his statement, and I welcome the engagement with trade unions. I remind the Parliament that I am a member of Unite and of the GMB.

The collapse of Greensill Capital raises concerns for jobs, businesses and public finances, not just here in Scotland but across the UK and beyond. The cabinet secretary said that the Scottish Government is mitigating risks as far as it can. Could he elaborate on the action that has been taken and on whether there are any constraints or barriers to acting more fully?

Like Murdo Fraser, I was wanting to hear a bit more about the verification of what Mr Gupta has said about adequate funding for current needs. Beyond the strength of his word, what particular action is being taken to check out what he has said to the cabinet secretary?

Given the wide-ranging interests of GFG Alliance and its close connections to Greensill, can the cabinet secretary outline what action the Government will take, not just to protect jobs and vital industries in the short term but, much more importantly, for the longer term, too?

I thank Monica Lennon for her question—she asked several questions, in fact. I can say that GFG Alliance is seeking to undertake a refinancing. That is a sensitive commercial matter and we need to be careful not to prejudice or undermine the process. I stress that we will do everything in our power to assist the steel and aluminium businesses and support their highly skilled workers. Back in 2016, when we realised that workers at Dalzell would be made redundant, we devised a special skills course for them. As a result, they were reskilled and retained, and they were not lost to the steel plant. If we had not done that, we would not have been able to reopen the steel plant. The cost of that intervention was—I have the figure here—just under £200,000.

We can consider making a number of interventions. We will leave no stone unturned in doing so and we will continue to work closely with the trade union representatives, as we did at Dalzell in 2016. At that time, the task force that I chaired met 13 times. It was a very large group that included one Richard Leonard, who was at that point a trade union representative. We worked very well, with no politics involved—we were focused on the objective of providing a future for the jobs at Dalzell. We have done that thus far, but we are not complacent and we are therefore doing everything that we possibly can to secure that future further.

I call Willie Rennie. I repeat the usual mantra—it is not directed at you, Mr Rennie—of shorter questions, shorter answers.

Five years ago, the Government told us that the multiplier and supply chain impacts in Lochaber would be worth 2,000 jobs. Are we ever going to see those jobs? What discussions did the cabinet secretary have with Mr Gupta about creating those jobs?

In my opening statement, I went over the number of jobs that have been provided. Those jobs are valuable and I hope that the Liberal Democrats support that—they certainly do locally in Lochaber.

I am pleased that we have received assurances on the safeguarding of 165 jobs and the creation of 44 new jobs at Lochaber. I am also pleased that the company has assured us that it has invested more than £41 million in the business since it took over. My understanding, from its information, is that that has included substantial investment in the value of the hydro assets and the further connection of those assets to the national grid, thereby increasing the security value of the property.

Of course, the problems facing the automotive sector meant that the company could not proceed with its original plans. That is simply a fact. In 2016, nobody—neither Mr Rennie, nor me, nor anybody else—anticipated the intervention of Covid. However, the company has brought forward an amended plan that proposes a billets plant and a canning plant. We are working with the company and I was involved in chairing the Lochaber group that deals with it on that matter.

There are challenges ahead, but we are working extremely hard with everybody in order to achieve delivery of those objectives.

I thank the cabinet secretary for his statement and for the Scottish Government’s active involvement in the smelter; I know that the cabinet secretary knows it well.

The cabinet secretary was involved in the launch of a—[Inaudible.]—about the expansion plans. He is right to say that it is important that there is no speculation. Is he currently able to talk about the status of that plan for the smelter?

I am not quite sure that I caught all that, but the company’s plans for expanding activities at Lochaber are in the public domain; I can share more information on that with Mr Finnie.

Those plans, rather than involving the automotive sector and a wheels factory, now involve the billets market, which is broader, I think, and offers real opportunities for job creation. They also include plans for a canning plant that would create for sale some of the finest Highland water from Ben Nevis and its environs, which offers an exciting prospect. The plans are detailed and the investment figures are clear, and I will endeavour to share that information with members across the chamber.

My grandfather spent most of his working life in the Dalzell mill, so I know just how much it meant to have those jobs and that production secured. Steel is synonymous with my constituency.

Although I know what the steel sector means to my constituents in Motherwell and Wishaw, what does it mean to Scotland’s economy and Scotland’s future?

Like Clare Adamson’s family, many families in the centre of Scotland have the steel industry very close to their hearts and many people have seen their sons and, indeed, daughters work in the plant. That is a story that we wish to continue, particularly as we explore low-carbon opportunities. I believe that the workers at the plant want that positive story to be told and their hard work to be recognised.

I finish by paying tribute to the trade union representatives who assisted me in the task force in 2016, including the inspirational Steve McCool, Ross Clark, Derek Fearon, Richard Leonard, Kenny Jordan and David Tarren. Indeed, I had the pleasure of meeting up again with Ross Clark on Monday to thank him and the workforce for their great work for Scotland.

I welcome the cabinet secretary’s commitment to provide updates over the course of the campaign recess.

On the Fort William plant, when the plans were changed and announced, the cabinet secretary gave his support and said that support would be given by the Scottish Government. Has the Scottish Government reviewed the business plan for the facility? In its view, are the plans credible? Given the level of support for the facility, what support has the minister sought from the company over the plans?

My officials and I were closely involved in detailed work when we renegotiated the original plan that was approved by the Finance and Constitution Committee, in order to alter the business plan and move away from the model that was reliant on the automotive sector, for reasons that I described earlier, towards more profitable opportunities. We also had professional advice on those plans before we ascribed our approval thereto. We had lengthy discussions and negotiations, which are subject to commercial confidentiality, about the basis of the alterations to the plans and we informed the Finance and Constitution Committee of all that work.

Why was it important that the support went only to a business with plans for long-term operations of the Lochaber premises? What has happened to those plans?

The one clear reason why we took the approach that we did in offering support only to businesses with plans for long-term operations of the Lochaber businesses, including the smelter, was that if we had not done that, the outcome might have been that whereas the hydro asset might have found a purchaser, the smelter would not, and the last smelter in Britain would have shut. That was what motivated us then and it is what motivates us now.

It is true that the situation is challenging, but we are leaving no stone unturned as we try to secure the future for the excellent workers at the Lochaber plant, who are proud of what they do and are trading profitably and providing an excellent return for the local economy. The plant is very much part of the local culture in Fort William and Lochaber.

I am pleased to receive reassurance with regard to the GFG Alliance’s operations in Scotland, especially in Lochaber. When it purchased the Alcan estate and smelter in Lochaber, a commitment was made to the Scottish Government and, indeed, to the community that it would transfer some of that vast estate to community ownership, which would have created more jobs and boosted the local economy. However, I understand, from East Lochaber and Laggan Community Trust, that that has not happened. I wrote to the cabinet secretary about this, but, in his response, he appeared to wash his hands of the matter. Can I therefore prevail upon him to ensure that the GFG Alliance makes good its commitment to the community?

I do not think that it is correct to say that I washed my hands of responsibility. I understand, from the company, that there were substantial discussions with community interests, including community councils, and that those took place over a long period. There were also quite detailed discussions about one particular aspect or project that took place.

The company has advised us that there have been substantial investments by the company in improving parts of the Jahama estate, such as the properties and supporting gamekeeping activities. I recognise that there needs to be further discussion on all those things, and, of course, in taking things forward, we wish to encourage the company to look at potential community involvement. However, our primary focus remains the preservation of the plant and the jobs.

In his statement, the cabinet secretary mentioned the figures of £14 million and £32 million as being the guarantee that was approved in 2016, including by the finance committee, which I do not think I was on at the time. Does that mean that £32 million is the maximum guarantee that we would be liable for in any one year, or does it accumulate in some way so that there is a higher liability?

In my statement, I set out the information that I thought it correct to share with Parliament, and the annual figure repayments vary. The agreement that we reached, and the guarantee that we granted, was, as Mr Mason says, explained and presented to the finance committee, for its approval, as a contingent liability. At that time, the Scottish ministers had to present all proposals to grant guarantees in excess of £1 million. The committee received detailed written advice on the proposed guarantee and had the opportunity to discuss it with me and senior officials before granting approval. As I have said, the committee included representation from across the political spectrum, and, as I understand it, the decision by the committee to approve the facility was unanimous. That cross-party support was welcome then and it will be welcome now. I hope that we will continue to see that approach, because it is certainly what the workforces want from us.

I refer members to my entry in the register of members’ interests: I own a fishery on the River Spey, and water from that river goes down to Lochaber, to the plant.

Before the Scottish Government agreed to the annual revenues guarantee—under the Lochaber guarantee—what due diligence did it do on the generating infrastructure of the plant? Did it accept just the due diligence that was undertaken by Mr Gupta?

As would be expected, at the time of the original transaction, a whole range of due diligence was undertaken. It was conducted by employing leading firms and experts in the various primary aspects that we had to check in the transaction, so I am confident that we approached it and carried out due diligence appropriately. The cross-party finance committee played its required scrutiny role, and every member of every party gave support to the measure, which was very satisfactory.

As a former employee of British Steel for more than four years, working at Dalzell, I have considerable concerns about the future of the industry. Is the cabinet secretary convinced that the steel industry has a long-term future in Scotland, that it will be a prosperous one and that the workers’ jobs will be there not just for them but, hopefully, for future generations?

My ministerial colleagues have carried out work on the long-term future of the steel industry, and we believe that there is such a long-term future. I alluded to the fact that the market and prices in steel are very satisfactory and higher than they have been for some considerable time. As we emerge from Covid, there is optimism within the sector, so the task that we face now is to overcome the current challenges, because we have the capacity to continue to trade on what we understand from the company is a profitable basis.

In his statement, the cabinet secretary made some positive points, which I whole-heartedly endorse, about the Lochaber smelter. Does he share my view that the smelter is in good financial health, with a strong order book and new investment on stream? Will he do everything in his power to ensure that the smelter continues to be an active ingredient in Scotland’s industrial strategy?

Yes, I do, and yes, I will. I am extremely grateful for Mr Stewart’s continued support.

I think that that might be David Stewart’s last contribution in Parliament. He and I have known each other since, I think, 1990, when we first stood against each other. His presence here will be sorely missed. He is one of a small band of politicians who have been councillors, MPs and MSPs, and, over a long period, he has given devoted service to his constituents in the Highlands. Over more than three decades, he and I have almost always had a constructive working relationship. He has pursued his campaigns with persistence but always with courtesy, and he will be a sad loss to the Parliament. I wish him, Linda and his family very well. [Applause.]

I am aware that we are about to enter a period of parliamentary dissolution. That said, what is the single most important thing that we, as members of this Parliament, can do right now to try to maintain the jobs and reassure worried workers and their families?

As one reads newspapers that are full of speculation, one does not tend to see in those columns of comment any consideration of the workforce. What struck me from meeting trade union representatives on Monday was the workforce’s sense of commitment and enthusiasm to continue doing the great work that they do in Dalzell and Fort William. The single most important thing that we can do is bear in mind that the workers—the 200 at Lochaber and the 140 at Dalzell—should be uppermost in our thoughts. They deserve that we all act responsibly here.