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High risk investment criticised
A National Assembly Committee says the Welsh Government ‘poured good money after bad’ into a company in Swansea, which ultimately failed.
A report by the National Assembly’s Public Accounts Committee says the Welsh Government ignored its own due diligence in pouring more than £3m of public money into Kancoat, which operated an aluminium-coil-coating production line in Swansea from 2012, which ultimately failed.
The company received financial support from the Welsh Government worth £3.4m in total including loans and grants.
The National Assembly’s Public Accounts Committee heard a due diligence review conducted by the Welsh Government concluded that Kancoat’s business case appeared to be weak and inconsistent, and that the proposal involved the government taking on a significant landlord risk. It also emerged that two previous attempts to run a similar company out of the site had also failed.
The Company went into administration in September 2014 with losses to the public purse put at £1.5 million and rising.
A key theme throughout the inquiry was the lack of clarity and transparency around the Welsh Government's decision making processes, recommending that tougher guidance around identifying and mitigating risks be put in place, and that any decisions which go against due diligence need to be clearly explained and documented:
“The Welsh Government invested in Kancoat at a time shortly after the financial crisis, where many businesses were struggling to obtain loans and risks were generally greater than they are in a more stable economic climate.
But the Welsh Government’s decision to pour money into Kancoat defied its own due diligence, failed to recognise or mitigate against a number of potential risks, and was done with little documentation or demonstrable reasoning.
We want to see more robust risk assessments from the Welsh Government, clearer documentation around key issues, particularly when they go against advice, and better definitions of the sort of support offered and what that means for the public purse.”
A Welsh Government spokesperson said:
"We welcome this report from the National Assembly Public Accounts Committee and will now fully consider its findings. This was a complex case, as was recognised by the previous Welsh Audit Office report. As part of our commitment to continuous improvement, we regularly review our procedures and since this case we have implemented a number of key changes.”
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