Welsh Government business support changed after criticism

Alcoa plant

A critical report by AMs into a £3m government investment in a Swansea company that went bust has prompted ministers to make changes to the way it supports companies.

Steel-coating firm Kancoat was backed despite civil servants warning it had a “weak” business plan and was high risk.

The Welsh Government is to drop the term “non-repayable repayable business finance” as part of the call for more clarity in its business support.

Eleven changes were proposed in total.

The assembly’s Public Accounts Committee (PAC) said the government “ignored its own due diligence” and “poured good money after bad” into the firm.

The Welsh Government has accepted 10 of the 11 recommendations and the remaining one has been accepted “in principle”.

In response to the PAC report the Welsh Government says it will:

  • make a clearer distinction between interest-free and commercial loans
  • give clearer guidelines on whether an offer to a business is repayable or non-repayable
  • remind senior civil servants to set out clearly their rationale for any decisions which go against the advice of a due diligence report
  • reinforce the importance of a “pause and reflect approach” when dealing with requests for additional financial support for a single project or with multiple requests for support from one company.

It has already published additional guidelines for civil servants on risk assessment and mitigation.

The committee cited an Auditor General report which set out that of the £166m Repayable Business Finance made available to businesses between April 2012 and March 2015, £154m (93%) was in fact made available on a non-repayable basis – including £778,000 for Kancoat.

Giving evidence during the inquiry, senior civil servant James Price was asked what was meant by the term “non-repayable repayable business finance”.

He said it was “unfortunate wording” and that he had tried to get it changed on several occasions.

“It’s actually very simple: repayable business finance is a grant that you have to pay back, typically without interest. Non-repayable repayable business finance is a grant,” he said.

The government will now rename the Repayable Business Finance Scheme simply the Business Finance Scheme.

A Welsh Government spokesman said, “As part of our commitment to continuous improvement, we have already implemented a number of key changes to our processes and are reviewing our approach to providing financial support to businesses in Wales.

“We remain committed to supporting the growth of the Welsh economy and will continue to build on these improvements in line with the recommendations of the PAC report.”