Wales politics

Backing failed steel firm Kancoat cost ministers £5m

Alcoa plant
Image caption The former Alcoa plant was sub-leased to Kancoat by Welsh ministers

More than £5m of public money has been lost in supporting a Swansea steel firm which went bust, it has emerged.

Kancoat received £3.4m from the Welsh Government, despite a review warning it had a weak business plan.

It later went into administration and the government has told an assembly committee surrendering the lease on the building would cost an additional £2m.

In 2016, a senior civil servant said the investment panel that recommended the support got its decision wrong.

The site in Waunarlwydd had been previously run by Alcoa Group, but was shut down in 2007 and another firm, Falcon Steel, had received Welsh Government finance before being liquidated in 2011.

Kancoat was given a mix of loans and financial support by the Welsh Government between May 2012 and February 2014.

The company created 12 jobs but ran into difficulties when it struggled to maintain its supply of steel.

A separate report by administrator Gary Stones found Kancoat was seen as a threat to two steel producers, one of which was an envisaged supplier.

Kancoat went into administration in September 2014.

Image caption The lease ran until February 2029 at rent of £180,000 a year

In a letter last month to Nick Ramsay, Conservative chairman of the assembly Public Accounts Committee, civil servant Mick McGuire said: "Officials have now reached agreement with the landowner to surrender the Welsh Government lease of Unit 1 at the Westfield Industrial Estate.

"This agreement recognised that Welsh Government would not be liable for the rent beyond 30 June 2018 nor for the capital works that were an obligation of the lease; these costs had been independently estimated at almost £3m.

"The final amount for the surrender of the lease was £1.99m."

Conservative economy spokesman Russell George said this was "one of a long line of failings by Welsh Government to adequately monitor the spending of public money".

"The Welsh Government's record is littered with expensive errors, miscalculations, poor performance and an unguarded attitude to risk," he said.

'Particularly complex'

The Tories had previously accused former economy minister Edwina Hart of breaking the ministerial code by approving support for a company close to her Gower constituency.

The claim was denied by First Minister Carwyn Jones and a senior civil servant told an assembly committee he did not believe there was any "undue influence" from Mrs Hart on officials over Kancoat.

On Thursday, a Welsh Government spokesperson said that "with over 37,000 jobs supported across the whole of Wales in the last year and over 190,000 in the last five years of government, our record in supporting employment is strong" but "the Kancoat case was a particularly complex one as recognised by a 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 in order to protect the use of public money," the spokesperson added.

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