Hansard

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.