Shake-up of howWelsh Government funds businesses

THE WELSH Government is making significant changes to the way it provides financial support to businesses after it invested £3m in a Swansea company that went bust.

Steel-coating firm Kancoat was backed on the instructions of former Economy Minister Edwina Hart despite civil servants warning it had a “weak” business plan and was high risk.

A report from the Public Accounts Committee said the government “ignored its own due diligence” and “poured good money after bad” into the firm.

The Welsh Government has accepted 10 of the 11 recommendations and the remaining one has been accepted “in principle”.

In future the Welsh Government says it will make...

a clearer distinction between interest-free and commercial loans;

give clearer guidelines on whether an offer to a business is repayable or non-repayable;

remind senior civil servants to set out clearly their rationale for any decisions which go against the advice of a due diligence report; and

reinforce the importance of a “pause and reflect approach” when dealing with requests for additional financial support for a single project, or with multiple requests for support from one company.

A Welsh Government spokesman said: “As part of our commitment to continuous improvement, we have already implemented a number of key changes to our processes and are reviewing our approach to providing financial support to businesses in Wales.

“We remain committed to supporting the growth of the Welsh economy and will continue to build on these improvements in line with the recommendations of the PAC report.”

But Welsh Conservative Shadow Economy Secretary Russell George said: “The Public Accounts Committee made a series of recommendations and I am pleased to note that the Welsh Government has accepted almost all of them.

“The Kancoat affair was not the first time that time the Welsh Labour Government has taken decisions which have led directly to a massive loss for the Welsh taxpayer.”