Failed firms given grants owe Welsh government £11m

Griffin Place Communications, in Cwmbran, went bust in July and is one of the firms the Welsh government is trying to recover money from

The Welsh government is owed £11m by 54 companies it has given grants to, most of which have gone bust, figures obtained by BBC Wales show.

Thirty-five of the firms went out of business, 14 are in administration and five failed to meet job targets.

The Conservatives called for a review of how firms seeking grants are assessed in an assembly debate.

The Welsh government said the "vast majority" of businesses it supported were "successful in creating jobs".

After the recent failure of government-backed Guardian Wealth Management and Griffin Place Communications, First Minister Carwyn Jones called such cases "exceptionally rare".

Since May 2011 grants have been given to 1,087 companies to create specific amounts of jobs within three or five years.

The Welsh government is attempting to recover money from 14 of these firms.

It is too early to know whether most of the other firms have met their targets.

The Welsh government is trying to get back £700,000 it gave to financial company Guardian Wealth Management, which shut its office in Caerphilly in 2014

Gerry Holtham, a former adviser to Welsh ministers, said they should "give fewer grants" and focus on loans.

"The advantage of a loan over a grant is you can filter out some of the lower quality applications - businesses applying for loans are more likely to be viable," he said.

"There is no reason to think failure rates are excessive [but] the criteria for failure here seem quite forgiving.

"The grant is considered a success if the company does not go bust and provides a specified number of jobs for three to five years.

"If a company meets the criteria and leaves after three or five years, the cost per job to the Welsh government could be very high but that would not be a failure."

Gerry Holtham says giving firms loans rather than grants is a better use of public funds

The Federation of Small Businesses has previously criticised the grants policy, saying ministers were trying to "buy short-term jobs".

But Leon Gooberman from Cardiff University says the Welsh government has a "low failure rate".

"This is the reality of giving grants to companies," he said.

"The hope is the benefits of those that succeed outweigh the disbenefits of the failures.

"It's important to take a long-term view and see how effective the Welsh government is at recouping grant funding, although sometimes that won't be possible," he added.

'Best performance'

A Welsh government spokesman said the administration had to "take managed risk to meet our economic objectives and create jobs".

"Since May 2011 the number of businesses from whom we are seeking to recover funds represents just 1.3% of the total offers made. This is far less than national average rate of failure for businesses," he added.

"Last year we recorded more than 38,000 jobs created, safeguarded or assisted by the Welsh government.

"That is an increase of around 1,000 on 2013-14 figures and the best performance for 10 years."