An agency responsible for economic growth for half of Scotland has frozen all funding for new businesses, we can reveal.
Owners in advanced negotiations with Highlands and Islands Enterprise (HIE) have told The Sunday Post the agency has pulled the plug on potential projects as it can no longer offer financial support.
HIE confirmed yesterday there would be no new commitments or approvals “that would incur revenue cash costs in 2020/21 until we have more clarity on affordability”.
One Inverness business source said: “This has come like a bolt from the blue and I believe that’s as true for HIE staff as for the rest of us.
“Nobody can understand the Scottish Government’s talk about hundreds of millions for a new investment bank when they don’t have tens of thousands to help existing businesses.”
HIE, which covers an area half the size of Scotland and 10% of the population, is facing a further cut in its budget from the Scottish Government.
The Inverness-based agency is set to receive £58.2 million in the next financial year – down from £61.1m in 2019/20 and £71.7m in 2018/19 and a cut of £13.5m over just two years.
Rachel Hunter, director of service delivery, said: “We are currently operating in a very challenging financial environment, with many competing demands on our resources.
“As we draw up plans for next year with a reduced budget, we need to take stock of our commitments and prioritise rigorously and fairly to deliver the best outcomes we can for the Highlands and Islands.”
Opposition politicians demanded action from Scottish ministers.
Scottish Labour finance spokesperson Rhoda Grant said: “The SNP Government must come clean and tell us what commitments have been made that take up both Scottish Enterprise and Highlands and Islands Enterprise budgets.”
Katy Gordon, economy spokesperson for the Scottish Lib Dems, said: “Scottish ministers have been using the enterprise agencies as a cash cow to pay out big money to whichever business happens to be in the news.
“Ministers need to get a handle on how much enterprise cash they are diverting away from business and from community needs in the Highlands and Islands.”
Donald Cameron, Scottish Conservative finance spokesperson, said: “This is a dire situation for HIE, and it’s something the SNP needs to address as a matter of urgency. If the organisation is blocking funding for new projects, it renders the entire thing pointless. The SNP has the cash to fix this and must do so now.”
Contentious projects HIE has been involved in include plans for a £17.3m spaceport in Sutherland, with £9.8m from the business agency. It has also ploughed millions into the Cairngorms ski resort after the funicular railway was taken out of service and the former operators wentbust.
The Scottish Government plans to set up an investment bank to help businesses, pledging £2 billion over 10 years to capitalise it.
In a statement, it said: “We are working closely with HIE to identify opportunities to ameliorate in-year financial pressures so it can continue to meet the needs of businesses and communities across the region, and to support work on the funicular and wider Cairngorm masterplan.
“We are also supporting the economy and communities of the Highlands and Islands through our commitment of more than £200m over the next 10 years to city region and growth deals, our additional support for agriculture and forestry and continued support for the Scottish Rural Development Programme.”
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