A key executive of the shipyard firm at the centre of Scotland's ferry fiasco flatly denied that it was subject of a Scottish Government bailout when a controversial £30m state loan was given to them having been signed off by ministers.

Details of the position of Ferguson Marine Engineering Limited (FMEL) when the loan was given in the summer of 2018 emerged as concerns of a cover-up surfaced over the reasons for the taxpayer-backed loan to avoid any unlawful state aid claim.

The firm stated in a published letter three months after the loan was announced that it should not be seen as a bailout of the firm and appeared to sing from the public ministerial hymn sheet pronouncements.

There are continuing concerns of a cover-up surrounding the messaging for the reasons behind the ministerial intervention of the Inverclyde shipyard firm before it was nationalised at the end of 2019.

Ministers' public pronouncements at the time of the loan stated that it was in place to diversify the business – but privately, it was revealed through confidential internal Scottish Government papers that it was because Ferguson Marine was in financial trouble while dealing with the disastrous contract to build two lifeline ferries for Scotland's islands. They are over five years later with costs soaring to quadruple the original £97m contract.

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The documents revealed that the agreement was clearly linked to the delivery of the vessels and the dispute between FMEL and Scottish Government-controlled ferry owner CMAL over the rising ferry costs.

Tycoon Jim McColl, then owner of pre-nationalisation Ferguson Marine Engineering Limited (FMEL) who spoke out over a planned money trail inquiry regarding his former firm by Audit Scotland indicated the real reasons for a controversial Scottish Government £30m loan intervention were not divulged to avoid unlawful state aid issues.

"The reason that the government gave for claiming that the £30m loan was to further diversify the business was to avoid being accused of state aid. All of the funding by the government went towards progressing the build of the ships and this was verified," said Mr McColl, who was an adviser to then First Minister Nicola Sturgeon at the time of the loan.

The intent of state aid rules is to avoid financial assistance given by a government that favours a certain company or commercial group and which has the potential to distort market competition.

The Scottish Government said that it acted lawfully throughout the process.

The Scottish Conservatives have said the concerns "reinforce the case for a full, immediate, independent public inquiry into the SNP’s ferries scandal".

The loan money along with other funds were lost to the taxpayer and the Scottish Government as Ferguson Marine was plunged into insolvency in August 2019 in the midst of the soaring costs of the much-delayed two lifeline ferries being built at the Inverclyde yard.

But a published letter from Gerry Marshall, chief executive of FMEL, three months after the loan was sanctioned denied it was in financial trouble.

It states: "I wish to make it clear that these loans are not bailing out a failing business. They provide vital working capital to smooth the impact of the contract dispute with CMAL and also to help diversify the business.

He added: "Of paramount importance is for the public to understand that any cash pressure on the business has arisen as a result of unforeseen complexities and additional costs in the construction of the vessels."

The £30m loan which was preceded a year earlier by another £15m injection was the Scottish Government's first tranche of support for the shipyard, and set out ministers' stall in relation to its financial intentions.

It had already nailed its colours to the Ferguson Marine mast when former First Minister Alex Salmond suggested to Mr McColl that the last remaining shipyard on the lower Clyde might need saving.

The entrepreneur, one of Scotland's wealthiest men, rescued the firm from administration in 2014. He has said he felt he was a pawn in the Scottish Government's hunger to save Ferguson Marine and protect Scottish jobs.

The Scottish Government said in announcing the loan in June 2018  that it would provide working capital alongside investment from Mr McColl's Clyde Blowers Capital firm to help FMEL "diversify its business".

It said that the loan would enable the "shipyard to target investment in repair and maintenance capability and to win business opportunities in areas like ship servicing and repair, low carbon marine projects and decommissioning work".

The Herald:

But one confidential Scottish Government memo discussing the proposed loan confirmed that the real reason was that the business was in trouble. Administration was a "real risk" that "could damage the business, even further delay vessel delivery and risk generating significant job losses."

The loan would "improve the liquidity of FMEL". It would support delivery of the yard's prime purpose, the delivery of the two lifeline island ferries and "provide a platform for the shipyard to thrive in the longer-term".

They show that directors of FMEL indicated they urgently needed access to new funding if severe-cost cutting measures and further significant delays to the ferries were to be avoided.

"Without access to a further Scottish Government loan or other finance, the next planned step for FMEL’s directors is to issue redundancy notices to the bulk of the core staff at the yard – around 230 from a total headcount of 280. Under this plan only a skeleton staff would be retained to undertake limited work on the CMAL order – indeed, due to the deployment of various resources in repair and maintenance work CMAL believe this situation already to be the case."

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