GFG Alliance has defended its contribution to the economy after the Scottish Government was accused of recklessness over its backing for the firm’s acquisition of an aluminium smelting plant in Lochaber six years ago.
The Scottish Liberal Democrats revealed details of warnings ministers received from a senior official about the deal.
GFG is owned by controversial metals magnate Sanjeev Gupta, who acquired the smelter, just outside Fort William, and two adjacent hydropower plants in 2016.
The taxpayer-backed deal saved the UK’s last aluminium smelter from threatened closure.
It also saved the mothballed Dalzell and Clydebridge steelworks in Lanarkshire and retained steel plate production in Scotland.
The Scottish Government have been reckless, leaving the taxpayer on the hook for millions and throwing the interests of workers to the wind.”
Scottish Lib Dem MSP Willie Rennie.
At the time, the new owner pledged to save the existing 170 jobs in Lochaber and create another 300 through a £120 million investment in equipment and a wheel manufacturing facility. Hundreds more jobs were to be created through the supply chain.
First Minister Nicola Sturgeon later presented a special commemorative medal cast from Lochaber aluminium to mark two years of GFG Alliance investing in Scottish industry.
But Mr Gupta is now under investigation for fraud after documents filed at Companies House revealed he paid just £5 towards the £330m deal, leaving taxpayers to finance the rest.
GFG Alliance is also under investigation by the Serious Fraud Office, raising fears for the future of the Lochaber plant.
The group’s auditors quit last week, claiming they were unable to complete long-overdue accounts.
And a Freedom of Information request has revealed the government was warned its deal with Mr Gupta risked “very significant political, financial, state aid and legal issues”.
Scottish Lib Dem MSP Willie Rennie raised the issue in a debate on inward investment and trade on Wednesday.
No business case for intervention
Documents published on the government website show advice was issued to ministers, including Ms Sturgeon and deputy first minister John Swinney, by the director of economic development ahead of the deal taking place.
Ministers were told there was “less and poorer quality information than they would have wished to see” about GFG Alliance’s Liberty Steel business, and there was not a business case “that sets out a rationale for our intervention”.
‘Major ramifications’
Mr Rennie said: “The Scottish Government have been reckless, leaving the taxpayer on the hook for millions and throwing the interests of workers to the wind.
“We now know the government was warned about the major ramifications of the deal, from environmental clean-up costs to the uncertainty around state aid compliance.
“Despite all of this, the first minister decided to go ahead.
“It smacks of a government which is willing to throw taxpayers and workers under the bus in negotiations with big business.”
A government spokesperson said: “The Scottish Government acted at pace in 2016 to support a transaction… to ensure steel communities in Scotland had a future.
“If the wider group (GFG Alliance) fails to exist and the site is going to be repurposed to a different use then some of those liabilities, for environmental remediation, may then crystallise to the operators of the site currently and to any previous operator of the site.”
A GFG Alliance spokesman said the group’s acquisition of Scottish assets had preserved production and jobs.
He added: “The (Dalzell) plant has continued to operate in challenging circumstances, ensuring plate supplies to vital sectors of the economy, protecting jobs and contributing to the local economy in Lanarkshire.”
Conversation