Nicola Sturgeon’s £586m smelter rescue faces fresh scrutiny

Nicola Sturgeon’s £586m deal with steel tycoon Sanjeev Gupta to rescue an aluminium smelter in the Scottish highlands is facing fresh scrutiny after a formal investigation was opened into the audit of the company's finances.

The Financial Reporting Council (FRC) has launched an inquiry into the audit of Alvance British Aluminium, formerly Liberty Aluminium Lochaber, for the year to 31 March 2019.

King & King, a three-partner accounting firm based in Wembley, is being investigated over its sign-off of the smelter’s accounts, alongside three other steel companies owned by Mr Gupta.

Ms Sturgeon’s administration handed Mr Gupta hundreds of millions of pounds of taxpayer cash to buy the Lochaber smelter and associated hydropower plant at Fort William.

State guarantees worth £586m helped Mr Gupta acquire the business from Rio Tinto in 2016. Scottish ministers provided taxpayer support despite warnings about the financial strength of the buyer.

After originally promising to deliver 2,000 new jobs to the area, it emerged last year that just 50 positions had been created.

Scottish Conservative MSP Jamie Halcro Johnston, Scotland’s shadow business minister, said: “This is just the latest concerning development in a saga that once again calls into question the judgement of the SNP Government.

“Their decision to guarantee an astonishing £586m in public money to GFG Alliance for the Lochaber Smelter is looking more reckless by the day, especially given that it potentially broke state-aid rules, has failed to create the jobs that were promised and that the smelter has been valued at nothing.”

Criticism of the Lochaber guarantee follows renewed attacks on Ms Sturgeon for spending hundreds of millions of pounds to nationalise Glasgow shipyard Ferguson Marine in 2019.

Mr Halcro Johnston added: “This cavalier attitude from the SNP to risking taxpayers’ cash is reminiscent of the ferries fiasco, where Nicola Sturgeon and co inexplicably agreed to a contract with Ferguson Marine that didn’t contain a full refund guarantee.”

The FRC’s enforcement division will conduct the investigation into King & King’s audit of the four companies, which also include Liberty Speciality Steels, Liberty Steel Newport and Liberty Performance Steels.

The regulator underlined that its inquiry would focus solely on King & King. It said: “The investigation does not relate to any persons other than the relevant statutory auditor(s) and it would not be fair to treat any part of this announcement as constituting or evidencing an investigation into any other persons or entities.”

King & King declined to comment.

A spokesman for the Scottish government said: “There has been no call on the Scottish government guarantee, no debt is owing to the Scottish government, all fees due to the Scottish government are up-to-date and we hold a comprehensive suite of securities that are independently valued at more than the outstanding amount of the guarantee.

“The Lochaber business continues to perform well with strong order books.”

Confounding many of his critics, Mr Gupta has retained control of his business empire in the UK despite the collapse of his main lender, Greensill Capital, and some of his companies being subject to an investigation by the Serious Fraud Office.

Last week fraud British squad investigators visited the offices of Mr Gupta’s Liberty Steel group just days after French counterparts had raided the Paris offices of sister company GFG.

Representatives for GFG Alliance declined to comment on the fraud raids. But in an internal note to staff, bosses rejected wrongdoing and pledged full cooperation with any investigations.

Opposition leaders have attacked Ms Sturgeon’s support for Mr Gupta in the years preceding the collapse of Greensill.

As part of the Lochaber acquisition, Mr Gupta secured ownership of a 114,000-acre Scottish hunting estate via an ­offshore company.

Jahama Highland Estates, dubbed 'the finest deer stalking ground in Great Britain' and held via an Isle of Man vehicle, is believed to remain in Mr Gupta’s hands.