BiFab: intervention analysis

Economic Appraisal: Establish the Counterfactuals

To help assess the additionality of any benefits delivered by the intervention, it is important to consider a counterfactual case that reflects what would have happened in the absence of the intervention. At Intervention Point 1 (December 2017) a full options appraisal was not documented due to the lack of available time. We have therefore developed our counterfactual scenarios for this analysis. The first of which considers a scenario if BiFab were forced to go into liquidation in the absence of SG funding. The second of these scenarios considers a situation where BiFab entered a process of managed administration. Our counterfactual cases are developed from the point of the first intervention and consider what would have happened if BiFab had not received the £15m loan from SG on 12 January 2018.

Counterfactual – Liquidation

Description

• In this scenario it is assumed that BiFab enters liquidation during Q1 of 2018, without the loan that the SG provided on 12 January 2018.
• This scenario assumes that the company's operations end immediately, with the remaining assets used to pay creditors and shareholders based on the priority of their claims.

Key Assumptions

• It is assumed that during 2018 Q1, employment at BiFab reduces by 80%. Following this, employment reduces by a further 5% in each of Q2 and Q3. The final 10% of employees lose their jobs during Q4 in 2018.
• It is assumed that return to permanent employment is evenly spread across the year. The labour market was buoyant, as such we assume 25% of employment returning in Q1 and a further 25% returning in each of Q2, Q3 and Q4. Return to work for agency staff is assumed to be quicker, at 50% during Q1, 75% during Q2, with 100% returning to work by Q3. However, 50% of agency workers are assumed to find work outside of Scotland.
• It is assumed that employees take roles in less productive employment when returning to work. It is assumed that GVA per employee is at the average level for the Scottish economy. The result of which is that the spill over effects are lower, with the economic multipliers used being weighted averages for the Scottish economy.
• It is assumed that there are delays in the delivery of the BOWL contract of either three, six or nine months.

Counterfactual – Managed Administration

Description

• In this scenario it is assumed that BiFab enters administration during Q1 of 2018, without the loan that SG provided on 12 January 2018.
• This scenario assumes that an insolvency practitioner is appointed to complete the remaining contracts and the company is wound down over a 12 month period.

Key Assumptions

• It is assumed that during 2018 Q1, employment at BiFab reduces by 25%. Following this, employment reduces by a further 25% in each of Q2 and Q3. The final 25% of employees lose their jobs during Q4.
• Assumptions on return to work are the same as in the liquidation scenario.
• It is assumed that employees take roles in less productive employment when returning to work. It is assumed that GVA per employee is at the average level for the Scottish economy. The result of which is that the spill over effects are lower, with the economic multipliers used being weighted averages for the Scottish economy.
• It is assumed that there are no delays in the delivery of the BOWL contract.