Official Report 836KB pdf
Our next agenda item is a mini-inquiry into the Cairngorm funicular railway. I am very pleased to welcome our witnesses to the committee. From Highlands and Islands Enterprise, we are joined by Stuart Black, the chief executive; Sandra Dunbar, director of corporate services; and Elaine Hanton, the Cairngorm programme lead. We are also joined by representatives from Cairngorm Mountain (Scotland) Ltd, which is a subsidiary of Highlands and Islands Enterprise. I am pleased to welcome Mike Gifford, the chief executive; and Tim Hurst, a board member and the former interim chief executive.
We have some questions to put to you, but before we get to those, I invite Mr Black to make a short opening statement.
Good morning, and thank you for the opportunity to attend the committee to discuss matters relating to Cairngorm Mountain. Highlands and Islands Enterprise is the owner and custodian of the 3,500-acre Cairngorm estate, which sits in the United Kingdom’s largest national park. The estate is bordered by several sites that are officially designated for environmental protection and scientific interest, and it is an environmental and economic asset for Scotland, particularly for the local area of Strathspey and Badenoch.
For decades, the Cairngorm Mountain resort has been a significant Scottish visitor attraction and economic driver for the local area and the wider Highlands, and it features Scotland’s only funicular railway. The funicular provides mountain access for skiers and snowboarders in winter and for sightseers of a range of ages and abilities in all seasons. Crucially, the resort supports year-round tourism employment, in contrast to marked seasonality elsewhere in the region. Approximately 72 people are employed at Cairngorm Mountain in the summer, which rises to around 100 in winter, generating £1.8 million a year in gross wages for the local economy.
As the committee is aware, we have faced serious challenges at Cairngorm since September 2018, when the funicular was taken out of service following a routine inspection that raised safety concerns. I stress that safety has always been our paramount consideration in the operation of Cairngorm Mountain and the funicular. Shortly after that, the then operating company was put into administration, and HIE established Cairngorm Mountain (Scotland) Ltd to maintain operations and secure not only the jobs on the mountain but the wider economic benefits that are underpinned by its activities.
Details of subsequent events, decisions and actions are summarised in our written submission, and I will not repeat them now. However, I emphasise the importance of the resort and the funicular in generating wider economic benefits in an area that has a high dependency on tourism. Thirty per cent of the area’s economy is dependent on tourism, which is one of the highest figures in Scotland. That is a key factor underpinning our rationale for investment over the years and at the moment.
Our analysis shows that, since 2017, the average annual number of visitors to Cairngorm Mountain when the funicular was running was 132,851. The annual spend attributed to funicular visitors is estimated at £10.2 million, and that activity supports 123 jobs in the local economy, with wages totalling £2.2 million and gross value added of £3.8 million.
Cairngorm Mountain (Scotland) Ltd has broadened the range of activities to attract customers to Cairngorm, and I am sure that Mike Gifford will talk more about that later. We are trying to attract visitors throughout the year, while maintaining a focus on winter sports, environmental protection and education, which we deliver through a dedicated ranger service. The rangers play a key role in environmental protection, enhancement and education, including in relation to 30km of footpaths around the mountainside.
We have added a lot of attractions in recent years, including children’s tube sliding, an adventure park, mountain bike trails and mountain karting, all of which have proven popular and strengthened the resort’s year-round appeal. HIE has also invested in infrastructure, including improvements to car parking, refurbishment of the exhibition, enhancement of the retail and food and drink facilities in the Ptarmigan restaurant, and camper van facilities. In addition, more than 33,000 trees have been planted to develop a new forest on the estate.
I highlight that HIE was successful in gaining £11 million in an out-of-court settlement after bringing legal cases against the original designer and contractor of the funicular as well as the parent of the operating company and the principal shareholder.
As the committee is aware, there are still some remediation works to be concluded before we can progress discussions to close the contract with our main contractor. We might therefore be unable to provide certain details at this time. However, we aim to be as open as possible and will be pleased to follow up in due course with any information that we are unable to provide today.
I reiterate that HIE and CMSL would be pleased to host a visit to Cairngorm by committee members and to facilitate meetings with stakeholders at the earliest opportunity. Thank you for your attention.
Thank you very much indeed. Before we begin our questions, could you summarise when the funicular has been open since the time that it was closed in September 2018 for safety reasons?
There was a significant amount of repair and remediation work to be done to the structure. It opened for a short period between January and August 2023, but routine inspections at that point again highlighted issues, and it was therefore closed on safety grounds. There was a six-month period between January and August 2023, and it reopened in February this year. It has been running quite successfully since then—in fact, it has had something like 70,000 visitors this year, which is really positive.
I read somewhere that it was closed in May 2025.
Yes—I am sorry. There was a three-week period of closure in May 2025 for some additional works.
I understand that there are also more scheduled closures in September and November this year.
There will be a short scheduled closure for three days next week. There is a routine maintenance period in November, which is usually a bit longer, but this year it will be just one week.
Those are routine maintenance shutdowns. They are not to address substantive structural engineering issues.
Next week’s closure is to deal with some final remediation issues. The closure in November might also deal with some of those, but they are not substantive. They are relatively minor, and there is nothing to concern the committee with regard to the structure. The closures are really about minor remediation works.
We are not the health and safety committee; we are the Public Audit Committee, so we will focus our attention on that. I just wanted to get that picture. If the area is being presented as a tourist destination and people expect the funicular to be there as part of the attraction of going there, but it is closed when they arrive, that has quite a damaging impact on the reputation of the area, does it not?
There is certainly disappointment when the funicular is not running. When it is running, there is a real boost to the local economy in business confidence and community confidence. Our aim, and the company’s aim, is to ensure that it is running and operating effectively.
Let me turn to issues of governance and oversight. How does HIE ensure that it has effective oversight of the Cairngorm Mountain project and those who are running it? How does that work?
There is a range of internal project management committees and project teams within the organisation. We also report regularly to our main board, which meets six times a year, and we always have a report on Cairngorm Mountain. We also report to our risk and assurance committee, which is our audit committee. In fact, it will meet tomorrow, and we will have a Cairngorm paper at that meeting. There is project governance at different levels throughout the organisation. There is also reporting between HIE and Cairngorm Mountain. We have a number of key performance indicators with Cairngorm Mountain, which we monitor monthly.
On the project itself, we are using a new engineering contract, which is a well-rehearsed and well-used type of contract in civil engineering in Scotland.
I do not know whether one of the other witnesses wants to come in.
I can add to that. As Stuart Black said, we have different layers of governance. In HIE, we have a programme board of really experienced executives who are responsible for the oversight of all aspects of the Cairngorm programme. That does not just include the funicular remediation work; there is also wider diversification activity and the management of the operating company. We have a programme board, and we also have a funicular project board, which oversees all of that activity.
At a more strategic level, as Stuart said, the HIE board receives regular updates. Our audit committee, which is a risk and assurance committee, similarly receives updates. We also have a board sub-group, which we convened specifically for the purpose of supporting and advising on issues relating to Cairngorm. The project in Cairngorm is sufficiently high risk that we have added additional governance to support the effective activity that we are doing there.
We sought to work closely with CMSL to ensure that there is good governance within it. It has an experienced senior team, with a newly appointed chief executive in Mike Gifford, and a board that represents the experience and capabilities that are needed to take the company through periods of challenge and diversification. As Stuart said, the funicular remediation project also has different layers of governance to support issues such as technical, health and safety, and environmental activity.
The last thing to say on governance is that we also have some formal stakeholder groups—for example, the Cairngorm advisory group, which evolved from a funicular response group that we put in place in 2018. We have tried to ensure that we have really good governance that demonstrates and meets all the requirements of Cairngorm in the widest sense.
On first viewing, there seems to be quite a proliferation of governance and lots of different committees and programme boards and so on. Is that the most effective way of providing the oversight that is required? It would be useful for the Public Audit Committee to have a diagram that shows how those different parts of the governance fit together and what their different roles are.
The other question that arises is the extent to which that structure is a product of lessons learned from the previous private contractor that provided the services, which was Natural Assets Investments Ltd.
There is certainly a higher degree of scrutiny of the project, and it also features regularly on our organisational risk register, which is one thing that Sandra Dunbar did not mention. It is pretty much at the top of the risk register. We took away the Public Audit Committee and Audit Scotland reports on previous exercises and considered them closely. We have strong project governance and have involved our board as much as we can. We also have regular liaison with Audit Scotland, because it is a nationally important project.
I now invite Keith Brown to put some questions to you.
I am the new boy on the committee, so my questions might not be exactly as they should be.
You talked about how you work with Audit Scotland. How does HIE respond to concerns about transparency and accountability? You will know that issues were raised in previous reviews. Will you outline what those concerns were and how you have responded to them?
I will get Sandra Dunbar to come in on that one, if that is okay.
09:45
A key finding in the Audit Scotland review encouraged us to be more open in our engagement, particularly with wider stakeholders. We have done a couple of things in that respect. We have a stakeholder group of representatives from the community and business with an interest in Cairngorm, which meets regularly and is co-chaired by the convener of Highland Council and the chair of HIE. It is an excellent forum for two-way communication—it is not just about our communicating what we are doing, but is also about actual engagement.
We have also done significant consultation as a result of the masterplanning exercise. Elaine Hanton might want to talk more about that but, with regard to wider transparency, we have sought not only to be as open as we can be in communicating our business decisions and the papers supporting them—and as open as we can be in response to, say, freedom of information requests—but to be more proactive in presenting our business cases, which are on our website.
We have put in place different layers of openness. Indeed, a prominent feature of our annual reports is what we have done at Cairngorm and the associated costs. As I said, there are different levels of openness and transparency, and we have reflected on the findings of the Audit Scotland reviews.
On the masterplan, we went through a process of almost two years that involved local consultation events. We had two different consultation stages and we ended up with over 2,000 responses. We had around 70 stakeholder meetings as part of that, too. It is very much about trying to engage with people with an interest—not just local people, but sporting interests, neighbouring landowners and others—to try to ensure that we are taking on board their comments, their feedback and their learning with regard to what has and what has not worked for them in the past.
Sandra Dunbar did not mention this, but we have also done a lot of lessons learned exercises, including with the Cairngorm advisory group that we mentioned earlier, and we have done the same with members of the CMSL team, ex-staff members of HIE and others who have been involved with Cairngorm over the years. It is all about trying to capture what has worked and what has not, and also what we need to bring forward into the future. We have tried to ensure that we have done all of that.
Given those actions, do you believe that you have met the concerns that were raised previously about transparency and accountability? I know that it will be an on-going thing.
That is for others to judge, but we have tried to go to the highest degree in trying to meet the requirements.
I also stress that we have taken the lessons-learned approach that we have used on this project with wider project governance in the organisation, and we now have very clear guidance for any major projects. We have also put a lot of our senior team and senior staff through training. This is not just about the lessons learned for Cairngorm; it is also about how we apply those lessons across the organisation.
It will be for others to judge, but it would be useful to know whether you believe that you have met the concerns that have been raised. I suppose that that was the point of my question. As for other recommendations made by Audit Scotland and the Auditor General, there will be different views on their impact and scope, but do you consider those recommendations to have influenced your current practices? If so, can you give any examples of that?
Yes. One of the key issues was openness and transparency, and we have certainly tried to ensure that we have those things, as Sandra Dunbar mentioned. That has been reflected in the support that we have in the local community. At the start, there was a fair degree of scepticism about some of the things that were happening on the mountain, but now, when you speak to the vast majority of people in the local community, you will find them very supportive of what has been happening at Cairngorm. Mike Gifford, in particular, is seen as a very good appointment, and he has been very open and has been meeting a lot of the local stakeholders. That is one area that we have really strengthened.
As for our general project management—I am sorry; I should, of course, have said that I believe that we have met Audit Scotland’s requirements in that respect.
Our general project management is well regarded, too—I think that we are seen as an effective and efficient organisation. As I said, we have tried to take the lessons learned from the Cairngorm project management and apply them across the wider organisation. We are dealing with many big projects at the moment; we have huge opportunities in our area, particularly in offshore wind, and we are taking some of the learning and experience from projects such as Cairngorm and applying them to big projects such as the Sumitomo investment at Nigg and other projects of that scale.
I was interested to read about the £11 million settlement. Many people will be reassured to hear that public authorities will challenge contracts that have not been properly delivered. Was any part of that process either informed by or done in conjunction with Audit Scotland? Did it help with that, or was it taken forward solely by HIE?
We certainly led on that. I agree that it is important for us to take action when the private sector does not deliver for us. We discussed the outcome with our board, and we discussed the negotiations with our sub-group. We considered the magnitude of settlement that we might accept, and the sum was at the top end of where we thought we might get to. We were very pleased with the result, which was a significant result for us.
I will bring in Sandra Dunbar on the detail.
From the outset of the 2018 period when Cairngorm Mountain Ltd went into administration, there were challenges for our whole strategy, not just for what we did with the operating company and the funicular, but for how we preserved and protected our position with respect to any recovery of costs. We were very considered in that regard.
We engaged with Audit Scotland and kept it up to date. As Stuart Black said, we led on that, although we took counsel, I suppose, from examples of good practice that could inform us. We had an excellent internal team of experts and good legal counsel to support us. That was a factor that ran through all our decisions on the funicular activity.
To what extent did you get help and support from the Scottish Government’s central legal services?
We got excellent support from our sponsor team and from the department. That is the way we work; we do not tend to work directly with other parts. We generally work through our sponsor team and through the economic development directorate, which was very supportive of what we were doing. As you rightly say, it is a matter of ensuring value for the public pound.
We did not have any specific advice from the Scottish Government legal team. As part of our wider openness and transparency, we did considerable consultation with the operating company on what we were doing and on the restoration of the funicular from 2018 to 2022. That involved articulating with the Scottish Government on how the legal cases factored into our decision making and our business case. We did not assume any recovery as part of our business case; we took a conservative approach. All our considerations ensured that we protected our position.
Good. Thank you—that clarification is helpful.
I now turn to Graham Simpson, who has some questions on the subject of financial management.
I will, indeed, ask about finances, but my interest has been piqued by news that you want to open a toboggan. Will you tell me a bit about that? That might attract me up there. [Laughter.]
I will ask Mike Gifford to comment on that.
The toboggan would be a great project for the area. One has gone in near here recently, and it has been hugely successful. Ours would be a single-track toboggan that can be fully accessible so that young people and people with disabilities will be able to use it, which is really encouraging. We have found that a lot of the tourists who come to the mountain are not top-end mountain bikers or skiers, and they want activities where they can just jump on and have a go. We are very excited about it. We have some designers coming in two weeks’ time to have a look. Once we get the designs, we will happily share them.
How long would the track be, and where would it be? Would it be accessed from the top of the mountain?
At the moment, the idea is that it will be accessed from the bottom and it will have its own lift. People will get into the cart and be taken up the track. We hope that we can put in the longest one in the United Kingdom. That is the plan, but we need to work with the designers to ensure that the ground will work for that. We need to be sensitive to other users on the mountain, too.
That sounds very exciting.
You are welcome to come up as soon as you wish.
Perhaps there will be another committee visit. I will certainly sign up for that.
I need to ask about the finances. Has the funicular ever made money? Has it ever made a profit, or has it always operated at a loss?
I will start, and then I will bring in Sandra Dunbar. Around the early to mid-2010s, some profit was made. It was a relatively modest profit of about £400,000 to £500,000 a year at best. However, at that point, good skiing weather was needed, as the profit was very dependent on there being snow. We are trying to move away from that in order to offer something with a much more year-round appeal.
The double challenge is that it snows later and later in the season. We used to have snow around Christmas time, which would last beyond Easter. However, now, with climate change, we tend to get snow from mid-February to March. That poses a challenge for the Highlands and Islands Enterprise budget, because we have to allow for a fund of some size. We have to ask the company to predict what it would need and we make a judgment on that. That is why it features so highly on our risk register.
Up until 2023, the Scottish Government provided some cover. If the amount went above a certain level, we always received support, but we are now being asked to deal with that ourselves as a relatively small organisation, which creates some financial challenges for us.
I can be more specific, if that is helpful for the committee. Between 2008 and 2014, the company made a profit for four out of those seven years. Largely, those profits were made during years when there was good snow cover. The work that we are undertaking with CMSL to ensure that the product offering is diversified so that there is not just a reliance on snow sports but an all-year-round attraction that would create more resilience, as well as the work on cost-reduction measures, means that we are more comfortable that there will be a sustainable business model going forward.
It is fair to say that, for the vast majority of the time that the funicular has been in existence, it has made a loss. Have you managed to tot up what the loss has been over the years?
We would need to go back and look at all the accounts. It was run by a charitable local trust for some time, which did not work. That is why HIE stepped in. It has been problematic. The challenge is that it has been far too dependent on winter sports, which is what we are trying to move away from. Every resort in Europe is having to move away from being reliant only on winter snow—very few resorts are not doing that.
As I said, the period of profitability was from 2008 to 2014. I clarify that HIE took ownership of the operating company in 2008—prior to that, it was not a subsidiary of HIE. We helped to restore the balance sheet and to consider issues including debt. From 2008 onwards, there was not an insignificant number of years of profitability. We developed a business case between 2018 and 2020 that looked at visitor numbers, sensitivities and diversification. We feel that the operating company has a credible plan for sustainability, which includes diversification and all-year-round weather facilities.
The facility is open at the moment; there are some planned closures, but it is running. Is it making a profit now?
I will ask Mike Gifford to come in, as he has the most up-to-date figures.
This financial year, we have taken £1.8 million, which has pretty much covered the operational costs of CMSL, which is great. It shows that there is an appetite for what we are doing on the mountain. We have had more than 70,000 visitors to the funicular and there have been another 30,000 visitors through snow sports and adventure sports this year.
Going forward, we want to increase those numbers, and the toboggan run would really help with that. We are looking at having mountain bike tracks from the top of the mountain, and we also need to look at opening access for walkers from the funicular to the summit.
Currently, we have a visitor management plan in place, so we need to work with partners in a sensitive manner. The number of people who come to the area, including Aviemore, to go walking is exceptionally high, so it will be great if we can offer that. There will be challenges, and we need to look at the section 50 agreement.
10:00
Is the current position that you will break even?
Currently, we are at break-even position, but there is a lot more to do. I have lots of ideas and the team are all on board, so we are looking forward to getting to that point.
It sounds like it. Apart from the issues to do with snow, what main factors have contributed to the cost overruns?
I will bring Sandra Dunbar in. Are you referring to day-to-day operations?
Yes. We could do with breakdowns as well.
The cost of remediation came in higher than the initial estimates. That was related to a number of factors, including Brexit, the pandemic and the situation in Ukraine. A range of factors that affected the construction market also affected Cairngorm.
In relation to operations, we have talked about some of the issues, such as overdependence on snow. Moreover, the fact that you cannot get out at the top station puts off a number of visitors. Mike Gifford has done some work on that. We have some evidence that, when they find out that they cannot leave the funicular at the top station, people are turned away, and we do not know about the people who do not come because they know that they cannot get out at the top. Those are factors.
An important point for the committee to note is that the current work on the mountain is being done at Balfour Beatty’s expense. We have some project management costs, but the contractor is paying for the current remediation and repair work. We have paid a sum of £70,000 towards its work. It has been working on the hill, and the site, which is 2km long in a high mountain environment, is very challenging.
Will you explain that bit about people not being able to get out at the top? You will get the funicular up to a point—
Yes—
There is a restaurant and so on. What do you mean when you say that you cannot get out?
A visitor management plan, which has been in place since the opening of the funicular, restricts access. That was done to protect the high mountain area—there was a concern that people would travel on the funicular to the top and then go out on to the high plateau, which is where the protected species are. People are allowed out in winter for skiing, but summer visitors are not allowed out. You can walk to the top and get the funicular down, but you cannot do the opposite.
That measure has been in place as part of the planning agreement, when the funicular was granted planning permission; it was also a condition of the European funding. The funicular has been operating with that type of constraint since day 1.
That sounds bizarre. You can walk to the top and get the funicular down, but you cannot do that in reverse?
That planning condition was put in at the time, but we are working with Highland Council and NatureScot to try to do something about it.
We are investing in technology to carry out a case study. We will give people pocket devices to track their movements. We will watch them going from the top station up to the summit and back down. We hope that they will use the paths to do that. If we can make the case that people are not disappearing on to the plateau, we could start opening up the top of the mountain—that is certainly the position that I would like to get to. We will work with NatureScot and the Cairngorms National Park Authority to try to make that happen.
Do you need to do something about the conditions around the planning permission?
Yes—absolutely.
Okay. That is a very odd situation; I think that you need to tackle that issue.
As we look ahead, what safeguards have you got in place to prevent future structural failures and ensure reliability?
The on-going works are almost complete. We will have guarantees on the works from the construction company and we also have collateral warranties—so, many things are in place to ensure the completion. The aim of the work is to bring the structure back to its full life expectancy, which, when it opened, was 50 years, so it should be operational well into the middle of this century.
I ask Sandra Dunbar to come in with additional information.
First, as was mentioned, the contractual provisions give us some protections. Secondly, the operating company carries out on-going monitoring. We have exceedingly experienced staff on the hill as well, which plays a really important part. Mike Gifford and Tim Hurst might want to comment, but I think that that is our biggest strength with regard to the future resilience of the facility.
We have reached the point at which we have remediated the structure and returned it to the standard that is required by the Department for Transport for its authorisation. As such, it is now an authorised structure, and we have an on-going maintenance process and inspection regime to ensure that all the critical components in the system are kept within the original specification. There are regular inspections to ensure that the sort of things that happened in the past cannot happen again, and we have an integrated safety management system for that, which gives us an assurance that the funicular can be maintained safely over its 30-year life. We are in a good position.
My final question is about the restaurant. I presume that it is not open if the funicular is not open, which must have caused real issues with that side of the business. Do you deal with that separately? How has it done over the years and how is it doing now?
The restaurant is doing very well right now. It has been full for the past couple of months and pretty much at capacity throughout the summer. There is no access to the cafe if the funicular is not running, so the top cafe was closed and all the food and beverage offerings were down at the bottom, where we have biking, carting and the adventure playground. The food service still operated, but not on the whole mountain.
It is important to say that there was some winter skiing, even when the funicular was not operating. People could walk up to the mid station and get a tow from there or they could get to the top without the funicular when snow conditions were good.
An important piece of new infrastructure was also added when a couple of magic carpets—that is, travelators—and a snow-making machine were put into the beginners’ area. That proved to be extremely important for the local ski schools, which were able to keep operating. To its credit, the company did its best to try to keep open the resort and operate in the absence of the funicular, but there is no question that it was doing that with one hand tied behind its back. It is in a far better position now.
Magic carpets. That is something else to check out, convener.
Okay. You are proving why it would be useful for us to be able to visualise the site and its component parts.
I will take you back to the financial management element of the reinstatement of the funicular. In 2020, Audit Scotland produced a section 23 performance report that cited a figure from a meeting in February 2020, when the board considered that the cost of basically tearing up and removing the funicular would be £13.3 million, and the cost of reinstatement was estimated at £10 million to £15 million at that time. That was February 2020, which we all recognise as being the point at which the pandemic set in, and we know that the world changed quite a lot after that.
I will move us forward to the note that you helpfully supplied to the committee, which cites a reinstatement cost figure of £20.5 million. I have also seen a January 2023 figure giving a capital cost of £25.4 million. Will you talk us through that? You told us that you have paid £70,000 to the contractor Balfour Beatty, which is paying for the current work. Who has had to bear the burden of that cost inflation? Is it HIE or the subsidiary? Is it the constructor or the Scottish Government?
I can confirm that the correct figure for the reinstatement cost is £25 million.
As you said, a range of factors after February 2020 had huge impacts worldwide and affected the cost of the reinstatement. Moreover, when initial work was done on the structure, more issues were found with it. That, again, formed part of the legal issues on which we won the settlement—there was more work than had been first envisaged.
With regard to the reinstatement costs of £25 million, the costs of the work done subsequent to that by Balfour Beatty have been borne by it; that has not been paid for by HIE. We have paid £70,000 towards certain costs that Balfour Beatty has incurred, but it has been paying those other costs. Of the reinstatement costs—the £25 million—£18 million was paid to Balfour Beatty; the remainder was costs for consultancy and for our teams supporting that work. In short, £18 million of the £25 million was paid to Balfour Beatty.
Again, just for the avoidance of doubt, this is public money that is being applied.
That is correct—it is public money.
That is fine. I will now bring in Colin Beattie.
Correct me if I get my figures wrong, but my understanding is that the last time that the funicular made a profit was broadly 10 years ago. Since then, most of the time, the funicular has been closed. You said earlier that the GVA of the funicular was £3.8 million, but how can you calculate that when it has been closed for such a long time?
There have been periods when the funicular has been operating, and we have used the average number of visitors who have come and used it during those periods. So, it has been running some of that time, though not the most recent periods, obviously.
As Mike Gifford has said, we have had 70,000 visitors this year. Actually, the visitor numbers are slightly ahead of the business plan and financial case that we put together; indeed, they are ahead in every aspect other than that of winter visitors, which I think reflects the challenge with regard to the climate. However, the calculation is based on an estimate of around 11,000 visitors a month, on average, when the funicular has been running.
We know that 60 per cent of visitors are day visitors, and 40 per cent are overnight visitors; we apply spending figures to both, and then we take a view on the proportion of people who come because of the funicular. We have taken quite a conservative view on overnight stays. We multiply that, and that is how we come up with the spend figure of £10 million a year. I think that that is important, because, although we have said that the funicular has not been profitable, that visitor spend has actually had a very significant—indeed, huge—impact on the local economy.
I can understand the extrapolation that you have done, but clearly the funicular has not been giving a GVA of £3.8 million consistently, or even partly, over most of the last 10 years or so. Is this not a little bit like putting a finger in the wind, so to speak?
Well, we have used the numbers from when it was running. I appreciate that it has not been running. In fact, going back to what Mike Gifford was saying about the 70,000 visitors, I would say that, if that were extrapolated, you would get more than 10,000 or 11,000 visitors a month.
Yes, we are using a metric—we are taking some averages and multiplying things—but you are right: the funicular has not been running for the past few years, so we are using previous figures.
And there has not been the benefit to the local economy from the funicular that you had hoped for.
You also stated there were 123 staff. Are they purely for the funicular?
I am sorry—the 123 staff relate to the visitor spend. There are around 100 staff in the mountain resort. Mike Gifford can give you the precise numbers of those working on the funicular, but the important thing is that we are not just talking about the operation of the funicular itself; there is the restaurant at the top and all the staff there, too. There is a big knock-on.
What I am trying to get at is that you have calculated the GVA for the funicular, then you have given a figure for the injection into the local economy. You have talked about £1.8 million in wages for 123 staff. Are we talking about the same thing here?
No, Mr Beattie, I am sorry—there are two different things here, one of which is the direct impact of the employment in Cairngorm Mountain—that is, broadly, the 100 staff and £1.8 million in wages. The secondary effects are those related to the spend in the local economy—that is where we are talking about the spend of about £10 million and the 123 jobs. We are slightly mixing up the direct employment and direct spend on wages with the indirect spend in the local economy.
How many staff work on the funicular?
10:15
During the summer, we have around 63 staff on the hill. That is to run everything from the funicular to the two cafes and all the adventure sports. During the winter, if we have a busy season, that number can go up to just over 100, but if we do not have a busy season, we will not have that many staff. It is quite a big range.
Were you still paying any of those workers in the period that the funicular was closed?
The mountain resort has a certain staffing requirement. When the funicular is up and running, when there is more work to do at the top station and when there is more activity on the slopes, we have more staff. Generally, around 60 to 65 staff were employed.
Were they paid throughout the whole period that the funicular was closed?
Yes. We were trying to maintain the company and maintain employment in the company. It is tricky because there is more of an economic impact and benefit when the funicular is operating, but there were still things for people to do without the funicular operating—there were upgrades, car park improvements and a range of on-going activities to try to bring in more revenue for the company. So, we generally stayed around that level of 60 to 65 employees.
Tim Hurst might want to come in on that, because he was on the board.
We were still operating when the funicular was not working. Mountain biking and carting were still going on, and food and beverages at the lower car park were still open. The resort was still running, but not at its normal capacity.
During the Covid period—the closed-down period—26 staff were put on furlough, so not all the staff were working during the Covid closures. There were two Covid closures—in 2020 and in 2021.
Is it easy to get seasonal staff?
As you know, there have been challenges post-Brexit, which have affected lots of parts of Scotland, particularly tourism-dependent areas. I will let Mike Gifford talk about the recruitment issues.
It certainly can be challenging in the outdoor sector. It is also difficult for the food and beverage sector. We are currently fully staffed and we have seasonal staff on board who have been asked to stay for the winter season. Cairngorm is currently in a good position.
I would hope that you are embedded in the local community. How do you engage with and respond to community concerns, especially during the more sensitive periods when you are closed?
As Mike Gifford knows, there is a huge amount of interest in what is happening with the funicular, and there is a lot of local interest in what is happening on the mountain. As you drive out of Aviemore, there is a sign that tells you when the funicular is open each day. The funicular has a big impact on the local community.
On the point about responding to concerns, Elaine Hanton talked about the Cairngorm advisory group, which is a mechanism that we use to respond to concerns. It met much more frequently in the past—now, it meets a couple of times a year, but I think that that is because we have gained more confidence among the community. We also work closely with the Aviemore and Glenmore Community Trust, which is a very active organisation in the local area. HIE works with it on a range of different things.
The communication is not just done through what is happening on the hill; it is also done through our wider integration with activity in the local area. We have also continued to work with lots of other businesses—we know the impact that the funicular being closed has had on other tourism businesses. We have been embedded with community organisations and small businesses in the area, so we are quite aware of what is happening.
Is there a formal process for communicating with the community other than through ad hoc organisations?
There is lots of information on the Cairngorm Mountain website. That is updated every day with information about what is happening. We also have information on the HIE website. As I said, there is the formal Cairngorm advisory group, which used to meet much more often. I think that we are quite clear on what is happening, and if people want to raise issues, they can either raise them directly with the Cairngorm Mountain team or they can raise them with us.
Who is on that advisory group?
It is chaired by the convener of Highland Council, who is also a board member of Cairngorm Mountain.
The range of membership is wide. It includes local community interest groups, those with a local business interest, other public sector stakeholders who have an interest in outdoor or sports activities, neighbouring landowners and other mountain sport organisations. There are more than 20 members.
Not everybody comes to every meeting, but when we share information and have something to say, we make sure that all members of the CAG get that information in advance. We give them the opportunity to come back and speak to us and, if there is anything they want to raise with us, they can do that, too.
We have tried to be open and include as many people, local organisations and national sporting organisations with an interest in Cairngorm as we can. That also includes the section 50 stakeholders—the likes of NatureScot, Highland Council and others—who are involved in the visitor management plan that we talked about earlier.
Remind me how often that group meets?
At one point, it met very regularly. When it started off, it was called the funicular response group, and it was set up in response to the problem that we had. At that point, it met every six to eight weeks. It then went to quarterly meetings, as it evolved into the Cairngorm advisory group. During the past year or so, the frequency has been down to twice a year, but there are lots of touch points in between those meetings.
Our area team is active in working with businesses and communities in the Badenoch and Strathspey area. The group’s meetings are not the only time that we speak to those stakeholders. There are lots of other opportunities, forums and meetings that many of the same people attend.
I would say that there is a really good relationship now with local stakeholders, local businesses and local communities. HIE is an open door. Stakeholders can speak to us or Mike Gifford’s team about any issues that arise.
I have one last question. How do you measure the long-term economic impact of the funicular and its associated businesses?
Studies are undertaken on the ski sector in Scotland from time to time. For example, the figures that we are using are based on a 2022 study. We can also do our own evaluation work. We get a lot of positive feedback from the local community and local businesses. We will ensure that you get to meet those people as well as some people from the CAG.
We have done a lot of modelling on the long-term economic impact. The business case looked at what the economic impact would be, and, even with the higher cost of reinstatement, the benefit is still very positive—it is more than 3 to 1. We know that the on-going economic impact is significant, but we could do a more detailed evaluation once it has been up and running for a period.
Let me bring you back to some financial questions. Mr Black, you have stated three times over the course of this morning—it is also in your written submission—that you are keen to stress that Balfour Beatty has absorbed the cost of the remediation work on the funicular. I presume that Balfour Beatty has not sprouted a charitable arm. In what circumstances is it undertaking that work? Presumably, it was paid to do it—that is why you are telling us that.
Balfour Beatty was paid to do the reinstatement work. Subsequent inspections on the structure have found issues, and we have sought to put those issues right. The contractor is doing that work. You can draw your own conclusion from that.
It was paid to do the job, and it is doing the job, but who paid for it? Where did the £18 million come from?
The reinstatement work was paid for by the public sector. HIE and the Scottish Government paid for that work, but the subsequent work—the remediation work that is on-going—was paid for by Balfour Beatty.
So, it will cover anything over £18 million—is that correct?
We are possibly getting into contractual matters, convener.
It is important; we are talking about public money.
We have paid Balfour Beatty £70,000 to date for the work that was started following the closure in 2023.
You get the crux of my question, though. A huge chunk of public money has been paid to a private contractor to deliver the project and get it up to speed. It is clear that some work is still going on, although you say that it is minor rather than substantive. My point is that, as the Public Audit Committee, we are trying to work out what the overall potential liability to the public purse is.
On the remediation work, the £2 million that we have paid covers contractors working on our behalf, our project managers, legal support and so on. The sum that has been paid to the main contractor is £70,000. The work that it is doing is being done at its cost to put right work that was not done correctly in the first place.
That makes a bit more sense—thank you. I will not press that matter.
You said something interesting in response to questions about HIE’s risk factor and how you budget for planning ahead. You said, I believe, that the Scottish Government had provided some cover. I presume that you mean financial cover. If so, how much? In other words, when would your subsidy levels run out, and would you need to draw down Scottish Government money? You also said that that has been removed. My question, logically, off the back of that, is what happens when the operating company asks for more money than you have budgeted for?
We would then have to get into a discussion with our sponsor team in the Scottish Government about how we could support that. At the moment, we have a budget allowance for Cairngorm Mountain (Scotland) Ltd in our budget as a subsidiary. If it was to exceed that, we would have to have discussions with our sponsor team, and we might have to find the money from other parts of our budget, or we might be allowed an authorised overspend. Those would be the two mechanisms.
Okay, that answers that question—thank you.
My next question is more general; perhaps it is more of an observation that you can respond to. My understanding is that HIE took over the funicular in 2018, using the subsidiary that is here today, but it only fully went into operation in 2025, so seven years passed, although I appreciate that the Covid years were in the middle of that and life was difficult for everyone. Nonetheless, my understanding is that construction was still taking place during the Covid years in many sectors. Why did it take seven years to get it up and running? I find it hard to believe that any other snow-based resort in Europe would have put up with seven years of non-activity.
The site is challenging. When you see it, you will start to understand the difficulty that the construction entailed. We are talking about very steep gradients and a high mountain environment. A lot of the work required temperatures of at least 5°C for prolonged periods, and you just do not get that for many of the winter months, so it was a challenging period.
There was a six-month period of operation in that 2018 and 2025 window. However, the challenging environment, the factors around Brexit, the cost of inflation in the construction sector and labour supply were big issues. There are a range of different factors. The construction site is 1.8km long and almost 4,000 feet up into the Cairngorm mountains. It is a very difficult environment, and the contractor has to get some credit for the work that was done. It has been a very difficult job.
I appreciate that.
At the end of 2018, the funicular came out of operation. We spent a period looking at whether it could be reinstated at all and then considered what the design might look like. At the same time, we looked at whether reinstatement was the best option or whether it would be better to remove it or replace it with something else. We went through a business case process later in 2019, which concluded in August 2020. We entered into the contract with Balfour Beatty in October 2020, and work started in November 2020. There were a very few short weeks in 2020 before it had to demobilise for the winter period. You will appreciate that, in a mountain environment, the construction period is short. The contractor demobilised over that first winter, then came back on site in April 2021. Therefore, it was not seven years of construction. It was a shorter period of construction. The reinstatement took two seasons to complete. That is, as we have said, because it is such a difficult environment to work in. You can only work during the better months of the year.
I appreciate that, and thank you for the additional information.
In the light of the convener’s previous question, if the costs of starting afresh, rebuilding or building a new funicular were established, it sounds to me that the cost of doing the remediation was double the cost of putting in a new funicular. Who made the decision to remediate and why?
10:30
We did a full business case, which was scrutinised by our board and went to the Scottish Government. The numbers that you mentioned—around £13 million—were revisited as part of the full business case. If you took the funicular out, you would also need to take out the infrastructure from the top and bottom of the mountain, which would push up removal costs. The key thing is that, if you removed the funicular, you would pretty much close down the business and lose all the local economic benefits. When we looked at the impact of the different options and balanced the cost of doing something and what we would get out of it at the end, the best impact came from reinstatement.
We tested that again because, by summer 2021, it was clear that costs were increasing and that we could not conclude the works in one season. We had originally hoped that we could, but it was not possible because of the challenges that Stuart Black talked about. It was clear at that point that the project was going to the right and that costs were going up. Therefore, we revisited the business case and re-ran all the numbers. We looked at different scenarios for the reinstatement. We based our analysis on what we understood the cost increase was at that time, but we also tested what the tipping point would be. We ran the numbers with a £15 million overspend and a conclusion of works in 2025-26. Even at that level, it did not tip the balance, and reinstatement still came out as the best option.
We tried to be really conservative when we did that. Although we factored in the additional time and costs of reinstatement, we did not make any changes to the other options that we had looked at, despite the fact that the cost of those would inevitably have gone up as well, due to pure price inflation, if nothing else. We took a pretty stringent approach to that process. We did not assume from the start that reinstatement would be the best option. We considered what the right thing to do was for the local economy, which is why we ended up where we did.
It sounds as though you undertook an interesting due diligence process. What is the shelf life of the funicular once it is fully remediated? When will you have to start thinking about replacement?
The remediation and reinstatement works take it back to its original design life, which is about 50 years from 2021. However, we know that, with good maintenance, the structures will last longer than that. The maintenance schedules and work that CMSL will do, which will involve very clear processes and procedures, will enable that.
Mr Gifford, I appreciate that our job is to look backwards, but let us look ahead and talk about some of the positives. Clearly, the issues that you face in the Cairngorms are shared right across Europe. I am sure that you speak to colleagues in the Pyrenees or the Spanish Sierra Nevada, whose resort periods have suffered a similar level of shrinkage due to increased climate challenges. For example, last January, the average temperature in parts of Andorra was 23°C, which is incredibly difficult for a ski resort to manage, for obvious reasons.
How are you underpinning the resort’s long-term future? What are you doing to meaningfully diversify and bring in people and revenue?
I have been in the ski industry for about 25 or 30 years. Thirty years ago, we were discussing the possibility that there would be no snow in five years’ time. It comes in cycles. One of the best seasons that we had in a long time was in 2020, which is not that long ago, so we are due another one. However, as you said, we certainly need to diversify in future.
The team has made improvements to the slope, such as by adding a mountain biking park, adventure play areas and a camper van parking area. I want to enhance all those and ensure that they are running well. We can do better with our camper van parking area by inviting in touring vans and putting in better facilities than we currently have. The toboggan run will certainly help because, if that goes in, it can run all year round. Here in Edinburgh, the toboggan ran throughout the winter and was fully booked. If you go to its website, it currently says that no walk-ins are available and you must pre-book. We want to ensure that our activities are year round, so that it does not matter whether we have snow on the ground.
The other thing that we can look at is ski touring. Cairngorm is the one centre in Scotland where we can get people very high up without needing snow on the ground at lower levels; we use the funicular and do not need drag lifts. We can get people higher when the other Scottish resorts cannot, and we could allow people to go ski touring, depending on the section 50 agreement on planning. We need to look at that quite carefully. I certainly think that Cairngorm has a positive future as a year-round destination.
I can certainly attest to that because, a few times in the past few years, I have turned up in my Mazda Bongo to find that there is nowhere to park it and skiing is off because of the weather. After a very long drive up there, we just drove back home again. That is probably the experience of many people, particularly in the domestic market. When people make the effort to go up there in the morning when the weather is posted as being okay, and it takes a turn and the cafe shuts really early, which it did when I turned up, there is just nothing else to do. We all left. How do you convince people like that to come back?
If that happens when we have the toboggan run, you will have something to do. I look at the way that the whole business operates. If people are coming up, the cafes will be open.
It is important to start blurring the seasons so that we do not have a start and a stop, or a summer season and a winter season. We blur the seasons and, if there is no snow on the ground, there will be karting and mountain biking, and you will be able to use the toboggan run. We need to be a lot more flexible.
Do you offer local residents any discounts, and what are they?
We certainly do. For example, there is a car parking season pass for residents, which is £20. There is also a season pass for residents who are skiers, and we have kept the price of that the same as it was last year. We have added lots of other things for local residents, so they can use that pass all year round. They can come up in the funicular all year for free, and residents who are not season pass holders can access and ride the mountain biking trails for free every Friday.
Again, this has come about because of the feedback that we have received from engaging with the community. Community engagement is important to me, and we will be looking at ways that we can support the community.
Every year, we also have 300 pupils coming through schools, such as the Badenoch and Strathspey school skiing association, and we do not charge those schools for access to the mountain—they can come for free. That is very popular, and it is vitally important to what we are doing.
That is helpful, and it is good to hear. I hope that word of mouth will help to propagate traffic.
I have one final question about the long-term vision, and it might be a joint question for you and HIE. Investment has been very much piecemeal, for obvious reasons, because of the remediation works and adding bits to the resorts to improve it, such as car parking, the potential toboggan run and other improvements. It does not sound like a long-term strategy with a big-ticket ask at the top of it. What is the long-term plan? What sort of numbers are you looking at for long-term investment to ensure that, in 20 to 30 years, there is still a buoyant, self-sufficient, popular and busy resort?
We have been working to a strategy that was jointly agreed between our organisations and the national park, which has also signed up. It might seem to be piecemeal, but a clear strategy has been put in place. It is due for review next year because it is a five-year strategy. Mike Gifford’s vision is for Cairngorm to be the UK’s premier mountain resort, and we share that vision.
Looking ahead, there are some quite big decisions to be taken. The day lodge building dates from the 1980s, and it is not very energy efficient, it is poorly laid out and it is not disabled friendly. There are a range of different things to deal with there, and that is a big question. The other question is about another new chairlift facility on the mountain. Those are two big-ticket items that need to be addressed, and they are beyond HIE’s budget.
I would argue that this is a national resource. It is the only mountain railway in Scotland, and it is an important mountain because it is the sixth highest in Scotland and it is in the middle of a national park. It is a key tourism asset for the country, which is why it needs attention.
I will let Mike Gifford talk about his vision.
As Stuart Black said, we want to be a fully sustainable, year-round mountain resort. We want to be the best in the UK.
The current 25-year plan is up for review next year, which will be helpful for me because I am just coming into it, so I can add my views. We also need to get a year under our belts and look at the figures to see how Cairngorm is performing.
Community engagement will be important in shaping the future of Cairngorm; the community needs to be part of that. Cairngorm is hugely important, not just to ski schools but to mountaineering instructors and environmental groups—there is a national training centre that uses us every day. It is hugely important to the local area, and all of that needs to help to shape the vision.
I have been in post for three months, I am working on a three-year plan and I will continue to look beyond that.
I presume that you will be knocking on ministers’ doors next year, whoever forms the Government.
Absolutely.
I am conscious that Stuart Black is joining the Economy and Fair Work Committee for its pre-budget scrutiny session, so we have been conscious of the time that we have had with you this morning.
I take this opportunity to thank Tim Hurst, Mike Gifford, Sandra Dunbar, Elaine Hanton and Stuart Black, the chief executive officer of HIE, for giving us your time this morning and answering the questions that we have been putting to you. As I said at the start of the meeting, this is a mini inquiry for the Public Audit Committee to look into the detail of how the project has performed and what the future vision and strategy for it is.
I thank you all for now, and we will see you again in the future, I am sure, when the committee organises its visit to speak to the community and other stakeholders, as well as visiting the site in the coming weeks.
I suspend the committee while we change witnesses.
10:42 Meeting suspended.