Negotiations to reinstate the crisis-hit Cairngorm funicular are at an “advanced stage”, auditors have revealed.
Audit Scotland launched a probe into Highlands and Islands Enterprise’s (HIE) handling of the mountain railway’s closure and other problems at Cairngorm Mountain winter sports resort in August last year.
Stephen Boyle, auditor general for Scotland, said the Scottish Government and Highlands and Islands Enterprise, face “difficult decisions” on the future of the winter sports resort, including how they fund the reinstatement of the funicular railway and secure “longer-term financial sustainability”.
Speaking to Holyrood’s Public Audit and Post-legislative Scrutiny Committee, Mr Boyle said that while the site is a “key asset” to Scotland, it is one which “might not be able to rely” on winter sports as its main source of making money in the future.
HIE, which owns the Cairngorm Estate, awarded Natural Assets Investment Limited (Nail) a 25-year contract to run the snowsports centre, near Aviemore, in 2014.
In December 2018 the Scottish Government-funded development agency stepped in to manage the resort when the leisure company placed its subsidiary that operated it, Cairngorm Mountain Limited (CML), into administration following the funicular’s closure.
Staff and assets of the failed firm were transferred to a new company, Cairngorm Mountain (Scotland), set up by HIE in November 2018 to keep the resort operating, with the support of the agency’s own staff.
Mr Boyle told MSPs: “I think history has shown us that it’s been very challenging for operators to make this a successful commercial venture given that, in the past 12 years, we’ve had two commercial failures in terms of running the mountain with winter sports as the integral component to derive profit.”
Scotland’s auditor general added HIE has been “really clear” that its preference is to reinstate the funicular railway – with costs in the region of £15 million.
However, removing the railway and returning the land to its original state would cost “only marginally less” than that, he added.
Graeme Greenhill, senior manager, performance audit and best value, at Audit Scotland, said negotiations with a contractor to carry out the work were “at an advanced stage”.
HIE is also in the process of preparing a long-term masterplan for the site but this is taking “a bit longer than we would have hoped for” due to Covid-19, Mr Greenhill added.
In a report detailing the problems faced by the resort, Audit Scotland said the closure of the funicular railway in September 2018 was the “main catalyst” for operator Cairngorm Mountain Limited (CML) entering administration.
MSPs on the committee were told Audit Scotland believes there was “scope” for HIE to have had a closer interest in Nail’s finances during the duration of the contract.
However, the public spending watchdog was satisfied HIE took “adequate steps” and “appropriate advice” in the awarding of the contract.
Edward Mountain, MSP for Highlands and Islands, said: “Badenoch and Strathspey needs Cairngorm Mountain to be a successful business all year round.
“HIE must now be transparent going forward, something the auditor general accepted they hadn’t been in the past. The public deserve to have sight of their business plan and time to discuss it, before it is implemented.”
An HIE spokesman said: “We are close to a decision on the full business case for Cairngorm, which includes next steps to deal with the funicular.
“This has been an extremely detailed and complex process. It takes account of the findings of the review of uplift at Cairngorm, carried out in 2018-19, which involved wide consultation with local and national stakeholders.
“It also takes account of additional feedback we have had in relation to Cairngorm in more recent discussion with stakeholders.”
On the findings of the Audit Scotland, report, the spokesman said Audit Scotland and the Scottish Government carried out “thorough investigations” of HIE’s decision to appoint Natural Assets Investments Ltd (Nail) and of the period when they ran operations at Cairngorm. HIE has taken a number of recommendations made in the report on board, including measures to assess and manage “key risks”.