Scottish Enterprise bill ‘left for taxpayer’ Taxpayer left with £9m bill by agency

Saturday 10 September 2011

SCOTTISH Enterprise has left the taxpayer with losses of more than £9 million on loans and investments in businesses that have been wound up, struck off or fallen on hard times, The Herald can reveal.

upbeat: Lena Wilson said risk remains a critical element of Scottish Enterprise's strategy. Picture: Gordon Terris

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mark smith deputy business editor

In total, losses were incurred by the publicly-funded economic and business development agency on 92 companies – the largest of which was former flagship battery project Plurion, which has ended up costing a £4.6m write-off, according to the body’s annual report.

However, Lena Wilson, chief executive of Scottish Enterprise, contended the sale of the agency’s interest in four companies over the year to the end of March has resulted in proceeds of £7.5m, and she insisted that risk remains a critical element of its strategy.A spokeswoman for Scottish Enterprise also said many of the 92 cases involved “small balances” which arose, “for example, from tenants in SE property” who were unable to meet rental demands.Nonetheless, at the same time Scottish Enterprise invests in loan and equity finance for many start-up and potentially high-growth companies – many of which constitute high-risk ventures.Apart from Plurion, the agency’s annual report names three other companies – Adtech DSN, Orkell and Spiral Gateway – whose losses to the taxpayer are booked in the accounts and amount to write-offs of more than £250,000 each.Livingston-based audio and visual supply specialist Adtech DSN, in which Scottish Enterprise’s connection involved shares and loans to the tune of £288,000, was liquidated and dissolved in 2009.Meanwhile, e-learning portal Orkell, which was also based in Livingston, ceased trading in October 2008 and collapsed into liquidation owing the taxpayer £504,000.The accounts also show Spiral Gateway, a provider of microchip technology for mobile media devices and whose other investors included business angel syndicate Braveheart and Bank of Scotland, was wound up in 2009 leaving losses to Scottish Enterprise of £460,000. A fifth entity, Glasgow Development Fund, a partnership set up in 1993 between a subsidiary of the Glasgow Development Agency and companies in the private sector to provide loan and equity finance for local businesses, was also wound up ahead of a Scottish Enterprise write-off of around £1.1m.The spokeswoman said “the partnership has been wound up and all realisable assets disposed of”, but there was “no prospect of any further recovery and “the remaining loan balance has now been written off”.Ms Wilson added: “We invest in companies capable of having a significant impact on the Scottish economy in terms of more and better jobs and this does mean there is an element of risk in what we do. “In spite of this, we have evidence to show that overall, for every £1 of taxpayers’ money we invest in economic development activities, an extra £8 is generated for the economy over time.As well as these write-offs, over the past year, we’ve seen a number of successful exits from our equity investments, generating significant taxpayer profits. “These include the sale of our interest in four companies – Mpathy, Mobiqa, and LAB901and Memex – resulting in proceeds of £7.5m.”Scottish Enterprise registered the loss on Plurion, which was one of the schemes connected to the Intermediary Technology Institutes (ITI) scheme, after California-based Applied Intellectual Capital acquired the battery programme in 2009, but failed to make a payment for the bulk of the purchase price after going into administration. The company’s failure to pay the full amount means that more than three years after the sale of Plurion to AIC for £5.6m, ITI Scotland has received only £1.7m of the purchase price.As well as the hit to the agency’s finances, which includes any interest due, the future of what was hoped would become a Scottish industry leader have now been dashed.

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Scottish Enterprise bill ‘left for taxpayer’ Taxpayer left with £9m bill by agency

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