Warning EU aid changes could threaten economic development

Proposed changes to EU regional aid could jeopardise more than 20 industrial projects and threaten dozens of  jobs in the islands.

That is the warning from SIC development committee chairman Alastair Cooper, as the council lobbies at all governmental levels to ensure the proposal does not go ahead.

It would see Shetland excluded from the regional aid scheme for 2014-2020, leaving it as the only part of the Highlands and Islands ineligible for support for economic development projects. The council says the change would limit what the council, HIE and other public bodies could invest in new projects, placing Shetland at a “competitive disadvantage”.

Support in the ‘small business’ category, which applies to the majority of Shetland firms, would fall from 40 per cent to 20 per cent, while assistance to medium-sized businesses would fall from 30 per cent to 10 per cent. There would be no support for larger businesses.

Those businesses most likely to suffer would be manufacturing, crafts, textiles, renewable energy, tourism and services. The restriction would not apply to agriculture, fisheries and transport which come under different state aid regulations.

The EU proposal, placing Shetland in the same category as cities including Aberdeen and Edinburgh, has “come about largely because Shetland has weathered the recession better than most other areas of the EU” and “appears to be more productive as a consequence with low unemployment rates”, the SIC says.

However, the local authority is ushering in spending cuts totalling an eventual £38 million a year, including huge cuts to its own spending on economic development.

Council officials are warning that the use of indicators such as productivity and unemployment on their own are “not an accurate way of measuring the wealth of a community”.

They also point out that Shetland remains one of the remotest parts of the UK and the EU as a whole. Building and fuel costs are high, labour and skills are restricted and the closest external market is 200 miles away.

Mr Cooper said he was “deeply concerned” at the proposal: “This is a very worrying change which could threaten future developments in Shetland.

“In the past three years, over £400,000 has been invested in 11 development projects which fall into the affected categories. These projects are expected to generate revenue for the Shetland economy and create or maintain 30 jobs.

“The full impact on the economy would be around 45 jobs when the supply chain is added. If we look at the period from 2014-2020 this could threaten the development of over 20 projects, and that could be really serious for our competitiveness. We need to resist this proposal.”

Businessman Fred Gibson runs Shetland Composites, which has received grants from the council and HIE. He said his business would have suffered without the support.

“The development of our new premises just would not have happened without public sector support,” Mr Gibson said. “We have been able to win larger contracts from outside Shetland, and now employ more staff as a result.”

Malakoff managing director Douglas Stevenson is equally concerned. He is particularly keen for local engineering firms to be able to make the most of opportunities such as offshore decommissioning, oil and gas development, renewables and the continuing high levels of seafood activity.

“This is an important time for our business, just like many others in Shetland,” he said. “There are opportunities at the moment which local businesses need to take advantage of, otherwise large businesses from outside Shetland will benefit the most.

“But significant capital projects are not possible for us without public sector support at a time when the banks are still shy about investing at high levels.”

The SIC’s development committee will meet on 8th March to discuss the proposal and agree a council response to the EU’s consultation.

In the meantime, MSP Tavish Scott and MP Alistair Carmichael have been briefed, letters have been sent to the relevant government departments at Scottish and UK levels, all MEPs have been contacted and a meeting is being sought with the EU officials who have come up with the proposal.