The Circuit of Wales was dealt a significant setback on Wednesday, after the Welsh Economy Minister refused to offer a 100% guarantee for the £357 million development project. Without the guarantee, the future of the project is now uncertain, with doubts over the willingness of Aviva, a British insurance company, to continue with backing for the project.
After a long period of preparation, which included a Public Enquiry on the transfer of public lands, work was set to start on the circuit, set just outside Ebbw Vale in South Wales. Work had already started to get the site of the circuit ready to start construction.
The final piece of the puzzle had been secured several weeks ago, in the form of financial backing from Aviva. However, the Heads of The Valley Development Company had asked the Welsh Government to underwrite 100% of the investment in the project, with reports in the regional newspaper South Wales Argus suggesting that such demands had come from Aviva.
Welsh Economy Minister Edwina Hart wrote to the Welsh Assembly to inform its members that the Welsh Government could not underwrite the entire project cost. She wrote that there was "a significant question around the viability of the project" and that backing it was therefore an "unacceptable risk". The offer of an 80% guarantee had not been accepted.
Speaking to BBC Wales, the Economy Minister said she had been advised the project was too risky to underwrite fully. With Aviva refusing to underwrite 20% of the project, Hart told the BBC "there is no private money in this" and that therefore the risk would have fallen entirely on the taxpayer. This was not a good investment for the public purse, Hart said, telling the BBC "The advice to me was that it was not value for money, it was far too much of a risk for government."
Without the backing of the government, it is unclear how the project will proceed. The HODVC are still confident of being able to complete the project, but must now embark on a mission to find alternative ways of securing the project. In a statement, shown below, HODVC boss Michael Carrick said, "We will continue negotiations with The Welsh Government, the local authorities and Aviva Investors to advance the development on revised terms that will be acceptable to all parties."
The statement from the Heads of The Valleys Development Company is below:
Michael Carrick, CEO, Heads of The Valleys Development Company commented on Edwina Hart's letter (dated 6th April) to Rt Hon Carwyn Jones regarding The Circuit of Wales project:
"We fully recognise and appreciate the support and commitment of The Welsh Government and the private sector partners over many years to get a project as complex as The Circuit of Wales to a point where construction is imminent.
"The Circuit of Wales is a significant mixed-industry development with the potential to deliver widespread regeneration benefits to the South Wales region. Many observers near to the site will have noted that the pre-enablement works and ecology activity has already commenced and we have a range of contractors engaged on creating sustainable employment opportunities in this challenged area.
"We respect and understand the Ministers decision on the support for a 100% guarantee for our private funding. While this was our clear preference and reflective of the negotiations we have held over the past six months, we accept that the project will need to progress on revised terms.
"We will continue negotiations with The Welsh Government, the local authorities and Aviva Investors to advance the development on revised terms that will be acceptable to all parties."