DAT’S A WASTE OF OUR £1.4M
CALL FOR ACTION OVER SCOTTISH ENTERPRISE GRANTS
Quango invested in tycoon’s firm despite legal crackdown A quango sank £1.4million of taxpayers’ money into a controversial tycoon’s company – even though new laws were about to make much of its operations illegal.
Scottish Enterprise (SE) threw money at Edinburgh- based Big Data For Humans (BDFH), which collected information about shoppers to create marketing profiles.
But legislation that had been in the pipeline since 2012 came into force in 2018 – meaning customers now have to consent to their data being mined.
That triggered the collapse of BDFH, whose clients included Tesco, Topshop and Wallis.
The company has now plunged into a dmini s t rat ion, leaving behind a trail of debt and job losses.
BDFH’s majority shareholder, MadCience Consulting, is a branch of the AirAsia airline owned by Malaysian multi-millionaire Tony Fernandes, which is at the centre of a corruption investigation.
Fernandes is a director of the data firm. He also owns English Championship footbal l club Queens Park Rangers.
BDFH is the latest in a string of high-profile bad investments by the Scottish Government-funded SE.
And it comes in the wake of our revelations that SE has run out of money, threatening the survival of many small businesses reliant on its support.
Scot t ish Labour f inance spokesman Rhoda Grant said: “In the last few weeks, the scale of potential financial mismanagement at SE has come to light.
“In this case, it invested heavily in a company whose business model was on the brink of expiry due to planned legislation changes.
“The people of Scotland will rightly question why. The SNP Government needs to step in.”
BDFH was set up in 2014 by Scottish entrepreneurs Peter Ellen and Steven Rose. The firm looked to process consumers’ data through artificial intelligence computer algorithms it had developed.
SE bought an 11 per cent stake in the company in 2015. The investment came shortly before the European Commission published a draft proposal for its information crackdown – the General Data Protection Regulation (GDPR).
In 2016, as part of a tie-up with AirAsia, MadCience Consulting bought 46 per cent of the shares – leaving Ellen and Rose with 20 per cent – and Fernandes joined the board.
SE increased its stake to 16 per cent and handed more grants to BDFH as recently as 2016/17. The GDPR was approved by the European Parliament in 2016 and came into force in May 2018.
Data miners previously had free rein to soak up huge amounts of personal information, making the industry a lucrative one. But many of their former practices are now i l legal under GDPR, which forces tech companies to provide customers with a chance to opt out.
BDFH went into administration last year with debts of £ 343,000, including £ 48,000 owed to HMRC.
Administrator French Duncan stated that the firm’s spiral into insolvency began with “changes in GDPR legislation… together with the decreased flow of data”. A plan to cut costs failed to attract further investment and BDFH, which employed 27 people, collapsed in March 2019.
SE is not expected to recoup any of its original investment. Its spokesman said: “Our role as an economic development agency involves taking considered financial risks to generate a return for the economy.
“In recent years, recognising its growth potential, we invested £1.4million in Big Data For Humans in the form of grants and equity.
“We always balance risk against the prospect of economic return.
“However, inevitably, some companies will fail and, when this happens, we always attempt to recover the appropriate public funding.”
The administrator and AirAsia were approached for comment.
Fernandes, 55, was privately educated at London’s Epsom College and became an executive with Virgin and Warner Music.
He bought AirAsia in 2001 and turned it into a profitable budget brand and has followed suit with a no-frills hotel chain.
The businessman owns car maker Caterham and has a 66 per cent stake in London-based QPR.
Last month, he temporarily stood aside as chief executive of AirAsia pending a probe into allegations that the airline took bribes to buy planes from Airbus.
We told recently how SE boss Steve Dunlop had emailed staff to tell them of the quango’s financial crisis. He ordered a freeze on new spending commitments unless “legally committed”.