Greensill Capital UK: Cabinet Secretary's statement - 24 March 2021

Thank you, Presiding Officer.

My statement concerns the administration of Greensill Capital UK Limited and its implications for businesses in Scotland.

I would emphasise at the outset that the subject matter concerns sensitive commercial affairs.

Therefore, I will be careful in my remarks and in answers to members’ questions to avoid saying anything that might breach commercial confidences or cause harm.  

I hope too that members might also recognise the sensitivity of this situation and the reasons for my caution.    

Greensill Capital is a UK-headquartered financial services company specialising in supply chain finance, working capital solutions and securitisation. 

Greensill Capital also has operations in the United States, Germany, Australia, Singapore, China, South Africa and the Middle East.

The last full audited accounts of Greensill Capital UK for the year to 31 December 2019 show revenues of 420 million dollars and total assets of 682 million dollars.

More recently, the business has faced financial difficulties and on 8^th March, joint administrators from Grant Thornton were appointed to Greensill Capital UK. 

While Greensill Capital has no base in Scotland the reverberations of the administration may still be felt here. 

At this stage, reliable information on the extent of Greensill’s operations – the range of companies it financed and the financial exposure of creditors – remains unclear.

A more substantive picture should emerge over the coming weeks as the administrators assess Greensill’s state of affairs and prepare a statement of proposals for creditors.

In the meantime, certain wider commercial repercussions of the Greensill administration have begun to surface.

For example, it is clear that the Gupta Family Group of companies – known as the GFG Alliance – has been impacted.

The GFG Alliance is a large multi-national with over 35,000 employees, operating from some 270 sites in 30 countries across the world.

In Scotland, GFG owns several businesses through Liberty Steel Group, Alvance Aluminium Group and SIMEC Energy Group. 

These groups operate the Dalzell and Clydebridge steel works, the Lochaber aluminium smelter, the hydro-electric power station at Fort William, Jahama Highland Estates and Shand Cycles.

Some of these businesses have received public sector support.

Across other parts of the UK the GFG Alliance is prominent in the steel, engineering and energy sectors.

Liberty Steel UK for example is Britain’s third largest steel producer and employs nearly 3,000 people at eleven sites across England, Scotland and Wales.

I spoke with Sanjeev Gupta, Executive Chairman of the GFG Alliance, last Thursday.

He was open about challenges posed by the collapse of Greensill but also emphasised the underlying operational health of GFG’s Scottish operations.

He indicated that market demand is strong and metals prices are currently among the best seen in over a decade.

Hence, GFG’s Scottish steel and aluminium businesses are presently on a profitable footing, according to Mr Gupta.

Mr Gupta told me the Group has adequate funding for its current needs while they progress refinancing.

He nevertheless confirmed that stabilising the finances of the GFG Alliance in the near term is important to its future activities, including those in Scotland.

On Monday, I spoke with the trade unions representing GFG workers in Scotland – GMB, Unite and Community. 

They expressed a very positive picture of the current strong markets in metals and the strategic value in retaining the skills and industrial capacity in these operations needed for the transition in Scotland to a low carbon economy.    

Members of this Parliament – particularly those who have constituency interests – will want to be kept up-to-date.  And rightly so.

That’s why I was keen to make this statement and take questions before the election recess.

I will also undertake to update members further as required by circumstances throughout recess.

But I can assure Parliament that officials are engaging regularly with the business at local and national level and through a Ministerial task force, we are monitoring the situation closely.

Today, I want to provide more information about GFG’s footprint in Scotland, the public sector support that has been provided and the economic return.

Liberty Steel Dalzell Limited is the recipient of a Scottish Investment Bank loan of £7 million.

Dalzell recommenced steel production in late 2016, having been mothballed by its previous owner, and the loan facility was agreed in March 2017.

According to information from the business, at the end of the 2020/2021 financial year Liberty Steel Dalzell will have invested over £18 million in order to make Dalzell operational and enhance its capability and product portfolio.  

In the five years since reopening in 2016, Dalzell will have produced and sold over 300,000 tonnes of heavy plate steel.

Sales to domestic and international markets have generated over £163 million in revenue.

And, perhaps most importantly, Dalzell currently employs 140 workers including three apprentices – retaining vital industrial skills and supporting livelihoods.

In autumn 2016, the government intervened in support of continuing aluminium production in Lochaber.

The Fort William smelter is of huge significance as the UK’s last remaining smelter with a current capacity to produce 48,000 tonnes of aluminium per year.

The complex has been operational for over 90 years and remains a major source of employment in the West Highlands.

In 2016, Scottish Ministers sought Parliament’s permission through the Finance and Constitution Committee to provide a guarantee of the smelter’s power purchases.

The Committee reviewed and approved the contingent liability.

Our support, which we offered to any bidder with plans for long term industrial operations of the Lochaber businesses, prevented the breakup of the assets and closure of the smelter.

The amounts guaranteed by the Scottish Government are published in the Scottish Government’s Consolidated Accounts and vary between  £14 million and £32 million per annum over the 25 year life of the guarantee.

Members may be interested in the economic return.

According to information provided by the business, GFG has created 40 new jobs in Lochaber since 2016, raising total employment in the complex to 200 jobs currently.

Payroll and pension contributions generated from this employment total over £41 million  and spending with suppliers – including many local businesses – exceeds £34 million since GFG’s acquisition.

These income flows are the very lifeblood that sustains communities and supports a large and valuable supply chain with hundreds of associated jobs.

In conclusion, Presiding Officer, can I remind members of the sensitive commercial nature of the issues arising from the administration of Greensill Capital UK.

The collapse of Greensill has clearly caused difficulties for a range of businesses and we must tread carefully to avoid fuelling harmful speculation.

We in this Government will continue to do everything in our power to support Scotland’s steel and aluminium sectors and their highly-skilled workers.

Our actions will always be motivated by the desire to protect and create jobs.

And to protect strategic industrial assets and foundational sectors on which additional supply chains and jobs rely.    

As Ministers we are accountable for the decisions we take.

And I want to assure Parliament that where we have intervened, substantial due diligence was undertaken and appropriate measures put in place to protect and minimise the exposure of public funds. 

No industrial intervention is without risk but I believe we have struck the right balance here.

We have supported and enabled short and longer term industrial and economic objectives.

We are mitigating risks as far as we can.

Critically, we kept Scotland’s steel industry, kept our only aluminium sector open and we are keeping people in skilled work.