Funicular rail repairs among challenges for HIE
ENTERPRISE agency HIE has been warned it faces significant financial risks and uncertainties in the current financial year.
In its latest annual report on the organisation, Audit Scotland also warns that without additional support or authorisation from the Scottish Government, it will be difficult for HIE to manage these risks without "significant operational consequences".
The 2018/19 financial year saw the agency spend a total of £65.9 million, an overspend of £1.8 million on its resource budget of £64 million, but within the £2.3 million approved by the Scottish Government to cover the cost of operations at Cairngorm Mountain (Scotland). This is a wholly owned subsidiary of HIE which was set up to continue operations at Cairngorm after the collapse of previous owner CairnGorm Mountain (CML).
The cost of repairs to the resort's funicular railway, at an estimated £9.6 million, is among the challenges HIE will face in the coming year, but HIE is also facing a £8.4 million increase in pension liabilities and a £4.2 million VAT liability which together have contributed to HIE moving from a positive asset position of £800,000 in March last year, to overall net liabilities of £19.3 million at the end of the 2018/19 financial year on March 31 2019.
The report also points to other significant projects HIE is involved with, which also have the potential to incur financial risks.
These include the proposed Space Hub Sutherland project, which HIE is expected to support with a contribution of £9.8 million towards an initial funding package of £9.8 million: "Recent indications are that the costs of the project are increasing and it is not yet clear how these will be funded," the report authors comment.
"HIE recognises this project is high risk and is in active discussion with key stake holders, including the Scottish Government and the United Kingdom Space Agency."
However, the report also notes that HIE has effective financial planning arrangements and has set a balanced budget, with the assumption that the VAT liability and repairs will be funded by Holyrood or treated as an authorised overspend.
An HIE spokesperson said: "Cairngorm is a key asset for Scotland, and the ski area in particular has played a significant role in the local economy over many decades. The Section 22 report is an extremely helpful summary of what happened at Cairngorm Mountain over recent years."
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