BiFab: intervention analysis

Economic Appraisal: Summary

As previously discussed, due to the circumstances of Intervention Point 1, a Green Book compliant economic appraisal was not undertaken. Had this been done, it would have captured and quantified the forecast economic benefits in a forward looking manner. In the absence of this we have sought to perform backward looking economic appraisal to ascertain the additionality of the intervention.

We considered two counterfactual cases - liquidation and managed administration. These developed counterfactuals were modelled against the actual outcome to assess additionality.

Our analysis was focussed on the four strategic themes set out by SG in their strategic case for intervention; supporting employment, strategic location, offshore wind supply chain and future investment. Overall it was determined that SG partially met the four strategic themes initially set out.

Supporting employment

It is estimated that the intervention protected £23m of GVA compared with the liquidation case and £15m compared to the Managed Administration case.

It is estimated that the Scottish Government’s intervention protected circa 250 permanent jobs at BiFab for the majority of the period between 2018 and 2020, compared to the counterfactual. The intervention also ensured that the BOWL contract could be completed, protecting circa 1,100 agency jobs for six months in 2018, compared to the counterfactual. Those employed at BiFab were employed in productive roles, resulting in higher economic output. The intervention also protected employment in the wider economy through protection of £5.6m of indirect and £5.8m of induced GVA compared to the liquidation case and £3.5m of indirect and £3.9m of induced GVA compared to the Managed Administration case. Had BiFab protected both permanent and agency jobs for the full period, these effects may have been greater.

Offshore wind supply chain

SG’s intervention allowed BiFab to meet the requirements of the BOWL contract. If SG had not intervened, a delay in BOWL’s operation may have resulted in the value of energy lost up to £71.3m, when compared to the liquidation and Managed Administration case.

The impact of these delays (assumed three, six or nine months) is that energy generated by Offshore wind may have reduced by either 600,174MWh, 1,200,348MWh or 1,800,521MWh during 2019. If three, six or nine month delays had occurred in the case of liquidation, it is estimated that the value of energy lost would have been between £23.8m, £47.5m or £71.3m.

Strategic location

There is limited evidence that BiFab was able to take advantage of these strategic locations and reach target markets that SG had identified in the initial strategic rationale for investment.

It is difficult to ascertain what would have happened in the counterfactual cases. While the company that acquired the rights to two sites won the NnG contract, it later terminated the contract citing cost escalation and delays had made it uneconomic. However, keeping the sites open during the intervention period ensured that the assets and infrastructure were maintained. In the case of liquidation or managed administration, if the sites had not been operational, expenditure could have been required to maintain the assets in order to facilitate investment later on.

Future investment

The intervention in BiFab did not help to deliver additional growth in target markets, however the sites’ assets were maintained and remained operational to facilitate future investment.

Since the BiFab sites have been sold, new companies have won some contracts in these markets at the sites. By ensuring the assets remained operational, the assets remained in a useable condition to facilitate future investment in the sites, owned by SG’s agencies Highlands and Islands Enterprise and Scottish Enterprise.