Scottish Government under pressure to explain ‘murky deal’ after Lochaber smelter auditors resign

Auditors of the taxpayer backed Lochaber smelter have resigned, piling further pressure on the Scottish Government to outline its full financial relationship with Sanjeev Gupta’s GFG Alliance conglomerate.

King & King Chartered Accountants announced their resignation from Alvance British Aluminium on Thursday, sparking accusations from critics the Scottish Government had been “duped”.

Accounts for business, located near Fort William, were published unaudited despite more than £60,000 being spent on audit fees.

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On Wednesday, business minister Ivan McKee said Mr Gupta’s company would receive the same £586 million backing from SNP ministers to save Scottish jobs at the smelter despite the collapse of his main lender and an ongoing Serious Fraud Office investigation.

King & King also resigned from several other GFG Alliance companies, including the Dalzell steelworks, itself backed by a £7m loan from Scottish Enterprise, due to a lack of information.

Despite this and although no information for why the smelter auditors resigned has been made public, Mr McKee claimed the Government had “seen what we need to see” in the smelter’s finances.

However, he would not set out what this was, blaming commercial sensitivity.

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In 2018, international metals and industrials entrepreneur Sanjeev Gupta presented First Minister, Nicola Sturgeon with a special commemorative medal cast from Lochaber aluminium to mark two years since his group the GFG Alliance began investing in Scottish industry.

In 2016 the Scottish Government agreed to guarantee 25 years of the Lochaber smelter’s power purchases from the associated hydropower plant, initially worth £586m, in return for a fee and security over the smelter, hypro-plant and land.

It is also potentially on the hook for millions in environmental clean-up fees at Dalzell after ministers claimed their back-to-back sale of the company, during which ministers owned the plant briefly at a cost of £1, may have breached state-aid rules.

However, the deals between the taxpayer and Mr Gupta have been subject to increased scrutiny since the collapse of GFG Alliance’s main funders, Greensill Capital, with a major, global refinancing effort underway.

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Willie Rennie, the Scottish Liberal Democrat’s economy spokesperson, said it was “starting to look as if the Scottish Government have been duped”.

He said: “A day after Ivan McKee said that the Scottish Government had seen everything it needed to see, the auditors have resigned, saying they don't have the information they need to give the business a clean bill of health.

"Workers at the smelter will be worried for what these resignations and the Serious Fraud Office investigation could mean for jobs.

"The Scottish Government needs to be taking a close interest in what is going on and assessing whether Sanjeev Gupta is still a viable owner for this business.”

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Jamie Halcro Johnston, Scottish Conservative business spokesperson, said: “The ructions around the Lochaber Smelter deal, about which the SNP Government has been characteristically secretive and evasive, seem endless.

“It beggars belief that, after a litany of unaudited accounts, fraud investigations and the collapse of funding, Ivan McKee says that he would strike the same murky deal again, putting half a billion pounds of taxpayers’ money at risk.”

A GFG Alliance spokesperson said: “We have parted company with King & King due to overall issues resulting from the collapse of Greensill Capital. We are in the process of appointing new auditors. There is no impact on the operations of any of our businesses."

The Scottish Government has been contacted for comment.

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All episodes of the brand new limited series podcast, How to be an independent country: Scotland’s Choices, are out now.

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