SE under fire for selling firm that cost taxpayer £4m

Published on Tuesday 9 June 2009 21:35

SCOTTISH Enterprise came under fire yesterday after it sold one of its subsidiaries for £150,000, having pumped in more than £4 million of public money to set up the firm.

Opposition politicians questioned the timing of the sale of hi-tech firm Optocap and warned that it was the kind of deal spending watchdog Audit Scotland should investigate.

The Livingston-baed firm, which packages microelectronic and optoelectronic devices, was established in 2003 using 3.2m from state-funded Scottish Enterprise (SE) and 800,000 from the European Regional Development Fund (ERDF).

It was set up to help universities and small firms to take their microelectronic and optoelectronic chips and package them so that they can be incorporated into larger devices or marketed to investors.

But on Monday, SE announced the firm was being sold to its management for 150,000 spread across five payments over the next four years, with interest being paid on the outstanding amount.

SE maintained that an independent valuation found the management buyout would "deliver the greatest potential for a return" on the investment.

But Jeremy Purvis, the Scottish Liberal Democrat finance spokesman, said: "If there is a considerable gap between how much has been used to establish the business and then the sales price then there has to be transparency and questions about the timing and the market conditions for the sale.

"That's not a criticism of the management buying out the business but a question for Scottish Enterprise to address. Even ERDF is still taxpayers' money."

Purvis added: "If there are deals in which there is a big gap between the set-up costs and then how much can be recouped then Audit Scotland, as the guardian of public money, should have an interest."

Andy Kerr, Scottish Labour's finance spokesman, said: "From the figures available to us, this deal would suggest the taxpayer is not getting a reasonable return for its investment.

"Questions must be asked of Scottish Enterprise as to the validity of this deal."

Optocap, which employs about 18 staff, has a turnover in excess of 1m and has been self-sufficient for the past year.

SE yesterday defended the sale. Neil Francis, director of innovation, industry and commercialisation at the economic development quango, said: "Optocap wasn't set up as a financial investment, that was never its purpose. The rationale for setting up Optocap was from an economic development rationale, not from a financial rationale.

"If we had found a service partner to deliver the packaging on our behalf – and there wasn't one at the time – then we wouldn't have got anything back when the contract ran out. We would have still spent the same amount of resources doing it but wouldn't have got a return at the end."