Cairngorm funicular costs criticised

Wednesday, March 03, 2010

Highlands and Islands Enterprise (HIE) has been criticised by a Holyrood committee for failing to take account of the risks of the Cairngorm funicular railway which led to "spiralling" costs.

In a report, the Public Audit Committee said the enterprise body did not properly identify "key financial and operational risks" in pursuing the project, including the financial health of the railway's operating company Cairngorm Mountain Ltd (CML).

HIE was also accused of not taking account of climate change and failing to re-evaluate initial visitor estimates.

The committee heard that due to the complexity of the project construction costs rose from £14.8m to £19.5m. To date £26.7m has been spent on the project, including £19.4m from HIE which purchased CML in 2008.

The enterprise body plans to spend up to £4m over the next three to four years to upgrade the site and attract a new private operator.

Committee convener Hugh Henry said: "The committee remains concerned about HIE's apparently open-ended financial commitment to the funicular. The potential for HIE to conclude its operational responsibility for the funicular hinges on its ability to transform the business and we therefore urge HIE to ensure that its future business plan for the facility is founded on accurate performance information and that rigorous financial-control measures are adopted."

This season Cairngorm has attracted 84,000 skiers so far, according to HIE, with skiers spending on average £100 a day.

HIE Acting Chief Executive Sandy Brady said: "Highlands and Islands Enterprise recognises the committee's criticism of earlier decisions surrounding the development of the funicular railway. While the agency adhered to Scottish Executive guidelines at the time, we accept that good practice in project appraisal and management has improved significantly since the early 1990s."

He added that by acquiring the company, HIE was able to reduce debts owed by CML to Bank of Scotland, Cairngorm Mountain Trust and Highland Council.

Brady said: "HIE is committed to its responsibility to maintain the safe infrastructure of the facility and to put in place a financially sustainable business model which enables the resort to continue increasing its contribution to the local, regional and national economy."