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The next item of business is a statement by Ivan McKee on GFG Alliance business operations in Scotland. The minister will take questions at the end of his statement, so there should be no interventions or interruptions.
14:53
I make this statement today to provide an update to Parliament on the status of the Scottish GFG Alliance businesses at Lochaber and Dalzell. As the nature of the statement is such that it touches on subjects that are commercially sensitive, I will be careful in my responses to members’ questions to avoid saying anything that breaches commercial confidence or that might cause harm to the businesses in question and their workforce. We all want the same outcome, which is to see those Scottish businesses thriving and providing good-quality jobs.
It is no secret that GFG Alliance has been weathering a storm since the collapse of Greensill Capital in 2021 or that it has been working to refinance its debts since the collapse of its main investor.
In Scotland, GFG owns several businesses, including Alvance British Aluminium and SIMEC Lochaber Hydropower, which operate the aluminium smelter and the hydro power plant in Fort William respectively. The company also owns the Liberty Steel Dalzell steelworks in Motherwell and a related site at Clydebridge in North Lanarkshire, which are not operational at present.
Liberty Speciality Steels is an English business that had an insolvency case raised against it by creditors late last year. I understand that GFG Alliance was able to settle with some creditors and wished to run a sale process for the company. There was an intervention on 20 August by the United Kingdom Government, which provided a letter to the court advising that, if the court was minded to appoint the official receiver, the UK Government would back that. On 21 August, the official receiver was appointed and took control of the business.
Lochaber and Dalzell have limited exposure to the Liberty Speciality Steels business and their management teams have confirmed that the insolvency of that business has no impact on their operations in Scotland.
We are monitoring with interest the steps that the UK Government has taken in relation to Liberty Speciality Steels and my officials are engaging with the relevant UK Government departments to understand their plans for the business. I assure members that we have contingency plans in place to cover any eventualities for the Scottish businesses and that our priority is to see them being operational, employing skilled staff and providing economic benefits in their respective regions and across Scotland.
The then Minister for Employment and Investment, Tom Arthur, and I met Sanjeev Gupta on 12 January this year and pressed him for information on GFG Alliance’s refinancing. We discussed the global challenges faced by Mr Gupta’s business and he reaffirmed his commitment to the businesses in Scotland. I spoke with Jeff Kabel of GFG Alliance on 9 September and he advised me that GFG is working hard to support Lochaber’s growth and has a credible plan for restarting operations at Dalzell in the coming weeks.
I have also met the Community trade union, which represents workers at Dalzell, to hear its concerns and I agree with it that we want to see the plant back up and running and to see people back at work. The union also told me that speculation about the future of Dalzell has an impact on workers’ morale.
I attend the steel council held by the UK Government and I am eager to see the steel strategy that is expected this autumn. Given the level of intervention that we have already seen for steel businesses in England and Wales, I hope that there will be an equal sharing of the £2.5 billion that is being allocated to support the steel industry in the UK. The industry has repeatedly raised the issue of energy pricing and how that impacts the competitiveness of the Scottish plants and I am also seeking clarity on that from the UK Government.
I say to members today that it was right for the Scottish Government to intervene to support the businesses at Lochaber and Dalzell. We provided Lochaber with a guarantee to protect those skilled jobs in the west Highlands, underpin additional investment at the site and promote industry in Scotland. Lochaber has more than 90 years’ experience of aluminium production and is a national strategic asset. Under the ownership of GFG Alliance, the business has created 40 new jobs since 2016 and a total of 204 people are employed there today, supporting a valuable supply chain with hundreds of associated jobs. Our intervention has sustained the business for almost a decade.
The guarantee—including its full value and total exposure and securities—was disclosed to Parliament’s cross-party Finance and Constitution Committee on 22 November 2016 and was approved unanimously by that committee. The total original exposure of the undiscounted guarantee was £586 million. That figure has reduced over the past nine years and all payments due to the Lochaber investors are up to date. The amounts guaranteed vary between £14 million and £32 million per annum over 25 years, with 16 years remaining.
We hold a robust set of securities, including the smelter, the hydro power station and extensive landholdings from which we could seek recovery if there was a call under the guarantee. The Scottish Government continues to earn the expected income in the form of guaranteed fee payments from GFG Alliance and has earned many millions in fees since 2017, an income that would not have existed without the deal. No public funds have been spent under the guarantee.
Lochaber is operating well and producing aluminium. The business has recently announced that it has sold 1,000 tonnes of its output to the United States of America, benefiting from the introduction of new US tariffs, and has committed £1 million to a summer maintenance programme that will see new equipment installed and improved efficiency measures.
The Lochaber businesses have had a combined turnover of more than £816 million since 2017. Lochaber has produced more than 300,000 tonnes of aluminium since then and the power station has produced 4,480 gigawatt hours of electricity during the same period. An upgrade to its grid connection during that period means that the power station is in a position to sell more effectively into the national grid. It has spent an estimated £52 million with Scottish suppliers and a total of £112 million across UK suppliers since 2017, providing an economic benefit to its region and beyond.
The business has seen £37 million of capital expenditure since 2017. It has a strong management team that is committed to the business and the local community and has an emphasis on providing benefits to that community, including the planting of 250,000 trees and 988 acres of peatland restoration since 2017. It has also spent £250,000 on donations and sponsorship. I know that members have been to the smelter to meet the workforce and see at first hand the good work that is done there.
I turn to Dalzell. We intervened to facilitate the sale and ensure the continued operation of this important industrial asset for Scotland, as the last remaining rolling plate mill in the UK. Dalzell received public sector support in respect of a £7 million loan from Scottish Enterprise to facilitate working capital, and Scottish Enterprise is currently in discussion with Dalzell regarding repayment of the loan. The Scottish Government’s intervention resulted in the continued production of steel and maintained skilled employment at Liberty Steel Dalzell. The plant has produced over 400,000 metric tonnes of metal since 2017, and it generated revenue of over £280 million during the same period.
Dalzell paused production in August 2024, with the staff being placed on a furlough arrangement that was agreed with the unions. That important step by GFG allowed staff to be retained and put the business in a strong position for recommencing operations. I have spoken with members of the workforce recently and I thank the entire workforce for its commitment. GFG Alliance has plans to recommence operations at Dalzell to supply plate for naval warship building and it has been awarded a contract by Navantia, with the opportunity to bid for more work in the near future from other customers.
I will summarise, Presiding Officer. There are no immediate risks to Lochaber and Dalzell from the court cases in England. We took steps to retain these historic businesses and ensure that Scotland preserves the ability to produce aluminium and steel. Lochaber continues to perform well and be a major employer in Fort William, and Dalzell has plans for a restart that will see it deliver steel plate for shipbuilding. We will, of course, continue to monitor developments closely, and I will update Parliament if a further significant development takes place.
The minister will now take questions on the issues that were raised in his statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. It would be helpful if members who wish to ask a question were to press their request-to-speak buttons.
I thank the minister for advance sight of his statement. Indeed, I thank him for issuing the statement, which the Scottish Conservatives requested due to concerns among both the workforce and the wider communities around Dalzell and Lochaber that were caused by negative media publicity about GFG Alliance’s financial viability.
Sanjeev Gupta has a track record of broken promises. He said that none of his steel plants would close and that he would not give up on the workforce—a promise that has clearly already been broken. At the time when he acquired the Fort William complex, he promised not to break up the assets and that he would transfer parts of the estate to the local community. Those are two more broken promises. At the time, he promised what turns out to have been a pie-in-the-sky proposal to create 2,000 new jobs in an aluminium car wheel factory, with apparently no thought as to where the workforce would come from—or, for that matter, where they might live. That is yet another broken promise. Can we really trust a word that this man says? Should Scottish ministers put much reliance on his statements?
Let me ask three specific questions about the content of the minister’s statement. First, the minister stated that the original exposure of the guarantee was £586 million, which has now reduced. What figure does the guarantee now stand at?
Secondly, what is the current value of the securities and how does that relate to the outstanding guarantee?
Thirdly, the minister referenced contingency planning for the future of Dalzell and Lochaber. Is that a guarantee to workers at both plants that their jobs are secure?
I reiterate that, if the Government had not taken the steps that it took in 2016-17, the plants would now have been shut for almost a decade. I might be wrong, but I think that Murdo Fraser was on the Finance and Constitution Committee with me at the point when we unanimously agreed that the deal was a good one and should be taken forward.
On the value of the guarantee, I have indicated that payments of between £14 million and £32 million have been made every year. They have been made for the past nine years. The £586 million value has therefore reduced, and it is clearly moving on a quarterly basis. As I indicated at the beginning of my statement, there are some commercially sensitive issues here, but I will seek to be able to provide further information on the guarantee value.
The same applies to the securities. As Murdo Fraser will be aware, that data is published every year through an audit process and the value of the securities is identified. That changes depending on a range of factors, but that is published information.
I have been working on the contingencies in various ministerial roles over a number of years. Extensive work has happened, within Government and using external advisers, to ensure that we have contingency plans in place for a range of options if some of the guarantee payments were to be defaulted on or for other situations in which we felt that we had to take further steps.
Our commitment is demonstrated by our actions over the past nine years in keeping the workforce at both plants in employment. As I indicated, if we had not taken those steps in 2016, that would not now be the case.
I, too, thank the minister for advance sight of his statement and agree with him that our focus has to be on securing the sites and the jobs. I also remind members that I am a member of the Community trade union.
In his statement the minister said that there is no immediate risk to the taxpayer. However, given the meetings, the fact that a statement has been given, and the fact that 15 GFG entities across nine jurisdictions are in insolvency, there are clearly concerns, particularly about Dalzell. Given that there are orders on the books but the site is furloughed, there is clearly a working-capital issue.
Will the minister confirm the likely forecast for the repayment of the loan to Scottish Enterprise? Will it be extended to provide the lacking working capital? Would that be contingent on some sort of equity in return?
If the site were to cease operations, there would be significant contingent liability for the Scottish Government, so will the minister provide an updated statement on the scale of the contingent liability for clean-up?
The order for Navantia, which had been placed with the Dalzell plant and which Daniel Johnson referenced, is moving forward. Commercial discussions are happening but, according to the latest information that we have, the business has secured the working capital to enable it to start production. As I said in my statement, we hope that that will happen in the next few weeks, so there is no plan or need to put more Government money in to support it.
Discussions continue on the loan from Scottish Enterprise to GFG—the £7 million plus interest payment—but it is in everyone’s interest to get the plant back up and running so that it is in a position to generate revenue and not only support jobs but, in time, repay the loan from the public purse. I think that we would all agree that it was right to keep the plant operating and paying wages.
With regard to the future, as contingency plans are developed, GFG is in discussions about the sale of the Clydebridge plant. I stress that, although GFG Alliance has been working through challenges, that has not impacted on the Scottish plants. However, should something happen to GFG, we have contingency plans in place to continue operations at the Dalzell plant and to seek alternative routes for the Lochaber and Dalzell sites.
The minister mentioned the morale of the workforce at Dalzell. Can he provide any update regarding what steps the Scottish Government has been taking to support and communicate with the workforce and trade unions?
As indicated, we have been in contact with the Community trade union. I met its general secretary, Roy Rickhuss, in the past few days. I also met representatives of the Dalzell workforce and heard from them that they were eager to return to work. People recognise that being on furlough for that length of time is not an entirely comfortable situation.
We all agree that it is a priority for us to see the Dalzell plant up and running, and we recognise that it is an important strategic asset for Scotland. I thank the workers for their commitment to the business despite the challenges over the past 12 months. They have seen Dalzell through different owners and difficult times. They remain committed to their local business. My officials and I will continue to work closely with them as the plans for the operational restart develop.
I ask the minister to readdress the questions that Murdo Fraser asked, because he did not give us any numbers. I think that the number that he was looking for on current exposure is £286 million, but the valuation of the assets, which form the security against that, is from 2019. That is the most recent valuation, and it is in the company’s accounts. I must refer the minister to Murdo Fraser’s comments about the reliability of some of the information that we are working with.
In the event that something does befall the GFG businesses in Scotland, does the contingency that Ivan McKee refers to involve us in making a commitment to the jobs through the Scottish Government funding the business? If that is the case, which budget line would cover the cost in that eventuality?
As I have indicated, repayments against that guarantee will continue to be made over that period. In relation to the quarterly amounts, with every quarter that goes by we are reducing the guarantee that is in place, which is obviously in everybody’s interest. It is also in everybody’s interest to keep that plant running, not least because of the workforce, but because it reduces that liability on Government. The value of the securities changes, and that data is published, but I can seek to provide more up-to-date information on that. There is an audit report every year that produces information on the extent of the value of those assets compared with the guarantee.
We have developed contingencies to cover a range of scenarios. Depending on what happens for each of those plants, we would have different options at that point in time. We keep that information up to date so that we can choose the most appropriate option should something happen. As I said, those worked-through options are available to deploy in the unfortunate situation that they are required. It is in everybody’s interest to keep the plant running under the current arrangement, which has continued over that period.
On the workforce, I reiterate our commitment to ensuring that those plants continue to operate. That has been witnessed by the fact that, over the nine years since the original guarantee was put in place, we have secured those jobs and, indeed, grown the number of workers employed at the Lochaber site, and we will continue to do so.
The Clydebridge works, which the minister referenced in his statement, is in my Rutherglen constituency. It has not been fully operational for a number of years, but it occupies a substantial footprint in Cambuslang. Constituents have raised with me their concerns about various issues, including historical land contamination and the impact that that could have on alternative use of the land and on the local environment. Will the minister advise what, if any, discussions have taken place on the future of the site?
I appreciate that Clare Haughey’s constituents will be concerned about the status of the Clydebridge site. We engage regularly with GFG at group level and management level on Clydebridge, and I discussed the matter with Geoff Cable of GFG Alliance when I met him on Tuesday. I understand that GFG is considering its strategic options for the site and recognises the environmental responsibilities associated with it. We will carefully consider that when assessing its options for the future of the site.
In March 2024, I asked the then Cabinet Secretary for Wellbeing Economy, Net Zero and Energy to make a full statement to Parliament on the Government’s exposure to risk as a result of its arrangements with Sanjeev Gupta. I also called on the Government, in the interests of transparency, to finally publish, in full, details of all the deals that it has done with Mr Gupta, the GFG Alliance and all of its subsidiary companies. Now, with a continuing investigation by the Serious Fraud Office into fraud, fraudulent trading and money laundering by the GFG group, with further financial meltdown and with no audited accounts lodged with Companies House for years, will the Government now publish the details of those deals?
First, I am obviously not in a position to comment on the SFO investigation. It is not for us to comment on that. The business is taking steps to audit accounts, but, as Richard Leonard knows, company law is not a devolved matter. We have published information on the deals as far as we can within the limits of commercial confidentiality. Indeed, my statement included a series of numbers on that.
However, the important point is that the plants continue to employ the workers and add value to local economies. Back in 2016, the Government took proactive steps to prevent their closure. If we had not done that, I think that Mr Leonard would, along with the rest of us, be facing a situation in which those plants would not be operating. Obviously, none of us would have wanted that. We have done the right thing, and we will ensure that those plants continue to employ workers.
Given the level of intervention in steel businesses in England and Wales and the news that the UK Government has taken control of Liberty Steel in Yorkshire, can the Minister for Public Finance provide an update on his discussions with the UK Government and his calls for equal sharing of the £2.5 billion that has been allocated to support the steel industry in the UK?
I met the former Secretary of State for Scotland, Ian Murray, and the former Secretary of State for Business and Trade, Jonathan Reynolds, on 22 July, and we all agreed at that meeting that the Dalzell steelworks has a unique position as the last plate mill in the UK. I raised the issue of the £2.5 billion funding available to support steel across the UK, and we all agreed that it was in the best interests of the workers and for steel production in the UK that the business got back up and running.
As I mentioned in my statement, my officials regularly engage with the UK Government’s Department for Business and Trade to understand the steps that it is taking with regard to Liberty Speciality Steel UK. I also attended the steel council meetings that were chaired by the UK Government and advocated for fair sharing of the funds in that forum. I will be writing to the newly appointed Secretary of State for Business and Trade, Peter Kyle, and the newly appointed Secretary of State for Scotland, Douglas Alexander, to ensure that they are as committed to Dalzell’s future as their predecessors were, and as the Scottish Government is, and that Scotland receives its fair share of the funding, given that Dalzell is the UK’s last plate mill.
The metals industry in the UK has been described as being in paralysis, as the GFG companies face criminal prosecution for years of failing to disclose their accounts. It is surely a cautionary tale of allowing key industries to be concentrated in the hands of a single, powerful, wealthy man. The minister says that contingency plans are in place to cover any eventualities. Does that mean that Scottish public money might be required to bail out this possibly criminal billionaire, or would the minister propose nationalising key assets under new management?
As I have indicated, contingency plans are in place. It is also worth noting that, far from public money being spent on the Lochaber site, we have received many millions in fees as a result of the guarantee that we have put in place, and up-to-date payments have been made against the payments to the bond holders. As I have indicated, we have been watching the situation closely for a number of years and, if something were to happen, we have contingency plans that would allow us to step in and take appropriate measures. I do not want to talk through the detail of that now, because of commercial confidentiality, but I hear Lorna Slater’s comments clearly, and she can rest assured that we have taken into account all the issues that she has raised.
The problem is that the Scottish Government has never been up front about its dealings with Mr Gupta. We still do not know whether the £7 million loan from Scottish Enterprise will be repaid, and we have no idea when the plant will be operational again. There are still far too many unanswered questions from the minister’s statement, which I am afraid has told us nothing.
First, will the minister be willing to publish the minutes of his meetings this year with Mr Kabel and Mr Gupta? Secondly, does he believe that the company has the funds necessary to buy the materials needed to fulfil the Navantia order, which seems to be the reason for the current impasse and why the workers have been furloughed? Finally, I heard no mention of the new billet facility at Lochaber, which, as we all know, is much needed for the future success of the business at that site.
Scottish Enterprise is in discussions with GFG about the £7 million loan. Again, I think that we would all agree that that was the right thing to do, otherwise we would not be having those conversations, because the plant would have been shut for many years now.
As I indicated earlier, it is important that the business gets up and running, operates and generates revenue so that it is in a position to repay that loan. I also stated in my response that the company is expecting to reopen the plant within the next few weeks to supply plate to Navantia, and it has indicated that it has resolved the working capital issue to allow it to do so.
Of course, we would all like further investment in Lochaber, but we have to recognise that, had it not been for the steps that the Government has taken—again, I repeat that we have not spent any public money and, indeed, we have received fees worth many millions in addition to all the guaranteed payments that have been made over that nine-year period—we would not be having this conversation, because that site would not be here, either.
The Scottish Government has previously provided much-needed financial assistance to prevent the closure of the site at Dalzell. Can the minister say any more about how we are working to ensure that both the workforce and the financial interests of the Scottish Government are being protected?
As I have indicated, in 2017, Liberty Steel Dalzell received public sector support in the form of the £7 million loan from Scottish Enterprise, which was vital to ensuring that the business had a future. We engage regularly with GFG Alliance at group level and at management level in relation to Lochaber and, alongside Scottish Enterprise, in relation to Dalzell to understand the on-going performance of those businesses, the challenges that they face and the steps that are being taken to deal with them.
As I outlined in the chamber previously, following the collapse of Greensill Capital as GFG’s main investor, we have put in place well-developed continuity planning in respect of eventualities that might arise for either of those businesses. Given the importance of the businesses locally, and because of our financial interests, I meet regularly with my officials to review those contingency plans.
I hope that the minister agrees that the defence industry represents a vital potential opportunity for the Dalzell plant, which is encouraging. However, more clarity is needed before we can have confidence in that hope. What is the credible plan for restarting operations at Dalzell in the coming weeks, given that the plant has previously been unable to operate due to high costs? How can we be assured that the plan will meet the requirements of the new plate contract? Surely, workers’ morale will benefit more from clear transparency than from continued uncertainty.
As I have said, I met the union and representatives of the workforce just in the past few days. They continue to engage with GFG and are provided with information to their satisfaction on developments as things move forward with that deal.
Clearly, as the member will be well aware, there are confidentiality issues to be taken into account in relation to the commercial contract, and there are a number of other issues that need to be resolved. However, the company’s position, which is credible, is that it will restart production in the next few weeks. As I have indicated, issues around working capital have been resolved, and the company has a number of other plans that it is working to execute to further increase production at the plant once the first contract from Navantia is in production and is being shipped.
I welcome the announcement, after a year’s impasse, of the impending restart of production at Dalzell because of the contract, via Navantia, for the fleet solid support ships. It is great news, but we need to build on it.
The minister referred to the £2.5 billion fund for steel investments that was set aside by the UK Government in the National Wealth Fund. I would like the Scottish Government to take a more proactive approach. We know from recommendations from the community and others—
Can we have a question, please, Mr Sweeney?
—that there is a need for an electric arc furnace and a direct reduction ironworks. Can the minister assure the chamber that the Government is working to try to proactively develop those assets and is not just standing by?
Yes. We are keen to have conversations about the future of those plants and the technologies that the member is talking about—electric arc furnaces and so on. However, members cannot have it both ways: they cannot complain about the fact that we have put public money in there and then complain that we are not putting enough public money in there. That said, we will continue to work to secure a share of UK Government investment in the steel industry across the country.
The first priority is to get the Dalzell plant back up and running, but once that has been done and we secure orders from other customers, we will be keen to talk to all parties—as we are doing with the UK Government—about the potential future of the plants.
The recommencement of operations at Dalzell will indeed be welcome news for my Motherwell and Wishaw constituency. The minister has mentioned the Navantia contract, but can he say more about other prospects for bids for work from Dalzell?
Navantia is a well-established company that has other investments in Scotland. The output of Dalzell and its workforce is well known in the market; it is good that Navantia recognises that and, on the back of that, has placed an order with the plant.
Given that Dalzell is one of the last remaining plate mills in the UK, it also has an important role to play in manufacturing supply chains across the industry, including clean energy, defence and shipbuilding. We will be working closely with GFG, which is considering its engagement both with previous customers and with new markets, as it has done with Alvance British Aluminium in the United States, with favourable returns for that business.
I am sure that the 2,500 new trees and the 1,000 acres of peatland restoration will be welcome. As Murdo Fraser has highlighted, Sanjeev Gupta promised 2,000 new jobs at Lochaber in 2016, but only 40 have been delivered. Will the minister outline in more detail the growth that is envisaged for Lochaber, as discussed with Jeff Kabel on 9 September? Did Jeff Kabel make any promises about potential new jobs?
The important thing to recognise is that not only have we secured the jobs that would not otherwise have been in place, but the number of jobs is growing. All the payments have been made as required by the business over that period. Indeed, the Scottish Government has received as a consequence of that deal a significant amount of revenue—many millions—on top of the payments that have been made. We should celebrate the situation that we are in, with the business continuing to contribute to the local economy.
The discussions with the business continue. It is seeking to open things up to other markets and to generate more business for and revenue from the plant as well as further investment, which we would all like to see going forward.
That concludes the statement. There will be a short pause before we move on to the next item of business to allow front-bench teams to change positions, should they so wish.
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