Scotland accounts for cost of industrial bailouts

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INO SHED a worker tests soldering guns, alone but for the radio. In the next one, a team admires a machine fresh from the Netherlands, which cuts steel pipes with elegant curves. In mid-August, the air will be charged with fumes and sparks. Some 400 workers will assemble the steel into 20-story lattice tripods. In the spring, they will be towed into the Firth of Forth and deposited at the bottom of the sea. A wind turbine will be attached to the top, sweeping 200 m above the waves. They will be part of the Neart Na Gaoithe network, built by the public electricity companies of France and Ireland, EDF and ESB.

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The work is a boon for Methil, a poor former mining town. This could prove to be a boon for InfraStrata, the engineering company which now owns Harland & Wolff, the shipbuilder of the Titanic. He bought the manufacturing yard, plus a second on the Isle of Lewis, in February in a deal worth £ 850,000 ($ 1.2 million), after BiFab, his former owner, or entered into administration. But it’s a bad deal for Scottish taxpayers, whose government injected loans totaling £ 51million into BiFab as it struggled to survive.

It was the latest in a series of lost bets for the Scottish government. In 2013, it bought Prestwick Airport, near Glasgow, for £ 1, citing its strategic value. But he has made little profit since; £ 43million in state loans has been reduced to £ 10million. The government is now trying to sell it.

In 2015 Ferguson Marine, a shipyard, was commissioned to build two ships for the state-owned ferry line. After consuming £ 45million in government loans, he took office in 2019 and was nationalized. The boats are now expected to be four years behind schedule and cost twice as much as initially expected. A report by lawmakers concluded that the loans were made without heeding the warnings and without proper oversight. And in 2016, the Scottish government agreed to provide guarantees to the Lochaber aluminum smelter in Fort William, in exchange for an annual fee estimated at £ 21.4million. These have since been reduced to zero; the government’s potential exposure has increased to £ 37million.

These sums are small compared to an annual budget of £ 34 billion. But they have damaged the reputation of the ruling Scottish National Party and frustrated its supporters. They reflect an absence of strategic planning, coupled with a willingness to issue checks without a clear idea of ​​the gains that money can bring.

Both are visible in Scotland’s failure to turn a green energy boom into manufacturing jobs, as promised ten years ago by then-Prime Minister Alex Salmond. Renewable electricity generation has tripled since 2009 to 12 GW, equivalent to all of Scotland’s domestic consumption, and planned projects will see this double again. But the kit was largely imported. The rusty and pothole-ridden Methil yard before InfraStrata took over, lost contracts for Scottish wind farms to more productive rivals overseas. Arup, a structural engineering firm, says Scotland lacks the deep harbors needed for the latest floating turbines.

Without a proper industrial strategy, Scotland has been left with “slammed yards that cannot win the job,” said Brian Wilson, a former Labor deputy and Minister of Energy. The resulting bailouts were mismanaged. Audit Scotland, a formal oversight body, concluded in 2019 that the country lacks a ‘clear framework’ for state interventions that takes into account likely outcomes and the government’s risk appetite. The government admits it lacked business expertise and promises reforms.

The Scottish independence movement was forged during the Thatcher era, which hit Scottish industry hard. During the 2014 referendum, which Nicola Sturgeon, the Prime Minister, hopes to renew, he promised to “reindustrialize”. Some blame its poor performance since on its limited ability to borrow to invest, a power constrained by Westminster. John Wood, boss of InfraStrata, says the nationalists’ focus on Scotland alone has been a major weakness, and the company will be able to compete for bigger contracts by sharing the work with its Belfast yards and Devon. The independence campaign has increased the pressure for bailouts, says Murdo Fraser, a local Conservative lawmaker. “We live with the consequences of hastily made politically motivated decisions without stubborn economic analysis.”

Boris Johnson, the Prime Minister, now promises to make Britain a wind power ‘Saudi Arabia’, borrowing a slogan first used by Mr Salmond, and bringing new jobs into old ones. cities through hydrogen and carbon capture. He is more interested in bailouts than his predecessors. On July 28, he nationalized Sheffield Forgemasters, a steel mill; last year £ 400million went to OneWeb, a satellite company, against the advice of the civil service. Only the state aid restrictions imposed by the EU prevented the Scottish government from pouring more money into BiFab. Mr Johnson plans to relax them, giving public bodies more discretion. He visited Scotland on August 4; during the flight he could usefully have meditated on the perils of great ambitions and weak controls.

This article appeared in the Great Britain section of the print edition under the title “Guid money after bad”


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