The SNP’s foray into high finance has come at a big price

In a refreshing twist for Scotland’s party of government, the latest potential scandal facing the SNP administration does not involve allegations of sexual misconduct, but rather high finance.

Earlier this week, finance company Greensill Capital filed for administration. Greensill specialised in supply-chain finance, which involves acting as an intermediary to raise money on the back of payment commitments between companies and their suppliers. Greensill’s innovative financing arrangements were instrumental in metals tycoon Sanjeev Gupta’s rapid expansion of his business empire, including his 2016 acquisition of an aluminium smelter at Lochaber in the Scottish Highlands, plus two nearby hydroelectric dams.

Companies within Gupta’s GFG Alliance group bought the industrial assets from Rio Tinto for £330 million, but the deal was achieved on the back of the Scottish Government providing a 25-year guarantee on purchasing power from one of the hydroelectric sites if the smelter shut down. The key to unlocking finance came from understanding the value in this type of asset – not the industrial assets, but the guarantee of a string of payments long into the future.