Quango but with no cash
Business grants body in crisis after admitting it has run out of money
Scotland’s business grants quango is in financial crisis after admitting it has run out of money.
Scottish Enterprise chief executive Steve Dunlop emailed staff earlier this month, ordering them to freeze all future support grants and slash internal budgets.
Opposition politicians have reacted angrily, claiming cuts at the taxpayer-funded agency could cripple small businesses and impact on economic growth.
Dunlop’s memo – seen by the Sunday Mail–explains that “unforeseen factors” have left the organisation financially crippled with over a month remaining of the financial year.
He then outlined a ra ft of draconian cuts including:
● Pulling the plug on new spending commitments unless “legally committed”
●Immediately halting the recruitment of new staff
●Cutting all travel unless absolutely necessary
Scottish Enterprise’s funding is expected to be cut from about £ 374million to £ 340million in the Government’s up and coming budget.
Dunlop’s email added: “Scottish Enterprise is expected to find savings and our draft resource budget allocation for 2020- 21 represents a nine per cent year-onyear reduction.
“Until the budget is finalised and until we have concluded our discussions with the Scottish Government about matching our budget to our priorities, we have decided it is prudent to make no new spending commitments or offers of support for financial year 2020-21.”
The cash crisis comes as the Scottish Government prepares to pump £ 2billion of public money into its new Scottish National Investment Bank over the next decade.
Hundreds of companies receive support from Scottish Enterprise every year – with start- up firms relying on grants to get off the ground.
The organisation has about 1100 staff based in 14 offices across the UK and a further 33 overseas.
An insider said Scot t ish
Enterprise staff were gobsmacked by the announcement.
The source said :“It appears there has been gross mismanagement of the Scottish Enterprise annual budget.
“The feedback from staff across the organisation is that the management is shambolic and embarrassing.
“Staff are keen for the chief executive to be accountable and for senior government to take notice.
“In effect, this stops Scottish Enterprise from carrying out the duties they’re meant to be doing to support Scottish businesses and the economy.
“If no new funding commitments are made over 20-21, effectively it means some small and medium businesses, who had previously relied on support during start- up and growth activity, will no longer be supported.
“This could clearly lead to potential business failures.
“I’ ve already heard of examples of SE- supported businesses asking for flexible payment plans due to not being able to get money until at least next year.”
Another source added: “It’s pretty extraordinary that an agency that’s supposed to advise new companies on their finances appears not to be able to manage their own.
“Running out of money before the end of the financial year looks amateurish.”
Labour leader Richard Leonard believes business will suffer as a result of the crisis.
He said: “Grants to support small and medium-sized businesses to stimulate innovation, increase productivity, deliver jobs and economic development should be a public policy priority.
“However, Scottish Enterprise has frozen new grant awards as its funding is expected to be cut by almost 10 per cent.
“Scotland’s economy is not strong, it’ s fragile and the Scottish Government’s budget is reduced when the economy performs worse than expected.
“Only by stimulating investment and innovation will we secure the economic turnaround we need and the chance to step up the funding our public services our communities badly need.”
Conservative shadow finance secretary Donald Cameron said: “The SNP has consistently failed to provide Scottish Enterprise with the strategic focus needed to be fully effective.
“It ’s deeply worrying that the organisation now appears to be in serious financial difficulties.
“Thanks to the SNP, the Scottish economy has been stagnating for years, so it’s no surprise to learn Scottish Enterprise is in trouble given it has lacked direction for a very long time.”
Liberal Democrat economy and fair work spokeswoman Katy Gordon added: “Too often Scottish Government ministers have simply used Scottish Enterprise to bail out whichever business is in the news.
“Ministers must get a handle on what is going on at Scottish Enterprise and ensure that ad hoc demands don’t risk derailing the core work of this essential agency.”
Scottish Enterprise has been frequently criticised for giving grants to arms companies.
US arms giant Raytheon, which makes systems for smart bombs in Glenrothes linked to alleged war crimes in Yemen, has been given £200,590.
Edinburgh-based Leonardo MW has received £7.5million in grants from Scottish Enterprise since 2015. It produces technology for F-16 fighter jets.
Scottish Greens MSP Ross Greer added: “If Scottish Enterprise are lost for where to save money, I have some suggestions.
“They could stop handing millions of pounds of public cash to arms dealers who supply the world’s most brutal regimes, for a start.
“They could also start using video conferencing for international meetings rather than taking expensive flights.
“Both of these savings would also improve the reputation and ethics of Scottish Enterprise and make the world a safer place.”
Scottish Enterprise admitted its budget for the financial year had been fully allocated.
A spokesman said: “Our 2019-20 budget is now forecast to be 100 per cent committed except for financial transactions.
“The draft budget has indicatively allocated almost £340 million to Scottish Enterprise and we will be working hard to ensure that this helps deliver inclusive economic growth across Scotland.”
The Scottish Government insisted it was working with the agency to try to protect business support despite the cuts.
A spokesman said: “We are working closely with Scottish Enterprise to identify opportunities to ameliorate in year financial pres- sures arising from the budget.”