Welsh Government reject bid to fund Circuit of Wales project

A good while ago now we were introduced to the idea that Britain would be getting a new circuit specifically for the MotoGP that would be the most amazing sounding state-of-the-art facility that would bring jobs, business and all sorts of other good vibes to the South of Wales.

Silverstone stepped in while plans continued to be made

The idea of the Circuit of Wales was proposed a while back and the MotoGP where meant to have hosted the event from 2015, but it has remained just that, a proposed idea, and if it wasn’t for Silverstone kindly stepping in and hosting the event, then we wouldn’t have had a British round on out of the 18 on the calendar.

More disputes on the funding have led to further delays, and to the whole thing looking like it won’t materialise, like ever. Funding arrangements were made previously, but things have once again changed as the latest scheme has been rejected.

Welsh Government rejected bid to fund over 50%

Insurance brokers Aviva have meant to have been responsible for a big chunk of the funding needed to get proceedings finally underway. The Welsh Government have since rejected the idea of becoming the financial guarantors for the company when it comes to getting work underway at the Welsh Circuit.

Benefits to the local community

The Circuit would mean jobs at a fantastic facility that would more than likely be able to become host to other events, and could possibly soon enough generate its own income that would prove incredibly beneficial to what it otherwise a quiet part of the Welsh countryside, making it more than likely a valuable asset to the local economy.

The project that would have cost £433 million to build the racetrack in Blaenau Gwent, but the Government have refused to supply the £210 million of public funding that was need to guarantee things getting underway down in the valleys.

Skates basically confirms they won’t be playing a part

So far, £9.3 million has been invested into the ‘project’ that has never really left the ground, and Economy and Infrastructure Secretary of the Welsh Government, Ken Skates confirmed that it is highly unlikely that it ever will. After meeting with the Cabinet to come to some sort of decision, it wasn’t good news.

Fully aware of the “stated potential positive economic impact” that the circuit could have, he stated that he is also aware that it is “a large undertaking” and that they have from day one insisted that “any support provided by the taxpayer needed to be proportionate and fair”.

He explained that in July 2016 he told the company that he would “expect to see at least 50% of the project funded and 50% of the financial risk of the project to be undertaken by the private sector”, with the plan being that the “project as a whole” would “provide Value for Money for Welsh Government and the public purse”.

New proposal submitted

He confirmed that in February of this year that the Circuit of Wales Ltdsubmitted its new proposal to Welsh Government” which he explained was “followed by a formal application in April 2017” which requested that the Government “enter into a guarantee of a loan facility of £210 million provided by Aviva Investors”.

He said that this would, “create a long term annual expenditure liability to Welsh Government” should the circuit fail to work out and the “lender called in that guarantee”.

Aware of the “very high risks involved” in the whole project, especially the “long term financial exposure to Welsh Government” he reiterated that an “extensive period of due diligence was undertaken” and that the Cabinet was again asked to consider the issues.

Government not willing to be exposed to the risks with funding

As a result of the meeting, the outcome did not look promising in any way. Looking at the structure of the deal he noticed that the Welsh Government was “exposed to more than 50% of the risk”; delving further he explained that “the £210 million underwriting element would carry a higher risk than other parts of the financing packaging.” The ONS and HM Treasury came to the conclusion that the “full £373 million debt of the entire Circuit of Wales would be classified against Welsh Government capital spending.”

Why not invest in existing tracks instead?

There are tracks around Britain that are race at at different levels already; some face the threat of being shut down due to lack of use; look at the likes of Three Sisters Race Circuit in Wigan for example. Rather than start afresh, money could be invested into those tracks by the external funders, in this case Aviva Insurers, and the Government could focus on spending that money elsewhere as Skates went on to say.

Money could be well sent elsewhere

He admitted that over the next three years that an investment like what was proposed would “have the same impact on Welsh Government budget as if [they] had already spent the money”. He felt that it would “place a significant limit” on their ability as a Government to “deliver current and future projects to improve Welsh infrastructure, housing, hospitals or schools.”

He then went on to compare the “scale of the impact” to building a Specialist and Critical Care Centre, 10 schools, or 5,000 affordable homes across the country. When taking this into consideration, as well as the fact that the race circuit would for now host one major event per year (that is providing it is done right and does not throw up any safety features that would prevent the MotoGP and Dorna from wanting to return), it just did not seem viable.

Welsh Government unable to offer the financial guarantee

He confirmed that with their “current limited borrowing ability” that the Cabinet as a result decided that the “potential impact on the public finances of the current proposal before them was too great”. When comparing how the money could be spent they decided that the “Welsh Government is unable to offer the financial guarantee requested on this proposal.”

Positives were considered before decision

Of course they did consider the positives of creating such a state-of the-art facility as not only would it be a first in circuits of its kind, it would create 6000 potential jobs “across all elements of the project” however it was not considered enough; many of them jobs would have been the with the construction of the site and it cannot be guaranteed that locals would be employed rather than services being contracted in from elsewhere.

They speculated that “once the initial track and directly related development had reached a steady state of trading around the year 2024, the number of direct full-time equivalent (FTE) operational jobs would be little over 100”. They also estimated that the development of the circuit could create approximately 500 indirect FTE jobs through potential visitor spend as well as 500 FTE construction jobs during the building of the track.

Realistic numbers were not appealing

They stated that, “This number of jobs is based on achieving the target number of events and any shortfall in the trading performance could reduce those employment opportunities.” They were aware it won’t necessarily be the local economy that would benefit but it would be “separate business, particularly in the engineering and automotive sectors” that would in fact reap most of the rewards.

As well as the snazzy circuit, there are plans to create a new technology park which they fell “could well require significant additional public funding”. Still they felt that “both the circuit and the technology park would likely fall substantially short of the 6,000 jobs figure.”

What about those waiting for the circuit to materialise?

Of course this idea had been long anticipated already, and local people, especially youngsters in the local schools may have decided to take their career in a direction that would ensure they are prepared, qualified and skilled for jobs in and around the race circuit. With nothing looking like it will materialise due to a now major lack of funding, what do they have in store for them and others who hoped for employment at the circuit?

Aware that the “people of Blaenau Gwent have waited long enough for the promised jobs”, Skates confirmed that the Cabinet “agreed to move ahead with a new and significant project”. He claimed that this new project will “build on the lessons of the due diligence process and use the approach assessed as having the greatest benefit in terms of local economic opportunities.”

New Automotive Technology Business Park in the plans

So, basically confirming that the Circuit of Wales is going ahead in their eyes as they are not willing to fund so much of the project, the Welsh Government confirmed that they are “committing to building a new automotive technology business park in Ebbw Vale”. This new project will use funding of £100 million over the space of 10 years and will have the “potential to support 1,500 new FTE jobs”.

They confirmed that they will soon “begin this work with the delivery of 40,000 sq ft of manufacturing space of land currently In public ownership”, which may not necessarily be the same land considered for the potential race circuit. (It sounds like they are making a huge saving already.

The new venture will be a “standalone project to be delivered by the Welsh Government and local partners” and he went on to state that there is “historically little evidence on an international scale of any track, on its own, acting as a catalyst for further local employment.”

There are also plans to “explore the potential of locating a South Wales Metro depot in the Ebbw Vale Enterprise one” where they plan to “introduce programmes to support new and existing employers in Blaenau Gwent on skills development within the local workforce.”

What does this mean for the MotoGP?

So what does this mean now for the MotoGP? In all fairness, with it all being a concept that did not materialise in time for the first proposed meeting in 2015, it is probably the least of the worries for the riders and teams. Dorna have a location to host their event, as long as Silverstone are willing to host it they will surely be able to come to some arrangement. However it is disappointing to see so any empty grandstands around the circuit which was developed more for the Formula 1.

The likes of nine times world champion, and MotoGP veteran Valentino Rossi favours the likes of Donnington Park, a track that hosted many British rounds and was well suited to motorcycle racing. Would the likes of Aviva be prepared to invest in bringing an existing track up to the same standards they were planning on creating instead?

It is disappointing as it would have been interesting to see this new facility, however from a personal point of view, the amount of money and time I would have had to invest in going to watch my beloved MotoGP, I probably would have considered going to a European round instead where the weather ca be guaranteed rather than camping out in the unpredictable British weather.

Other instances to consider should plans go ahead

Should the Circuit of Wales find external funding, what is to say after all this, that residents would not then start complaining about the noise and pollution in the area? Some companies, especially the likes of hotels, bars, restaurants, shops, petrol stations and so will benefit greatly from the extra custom generated from the race meeting and possibly a test that may take place, but will this be enough for new or existing businesses to open up expand or relocate to accommodate the busy period, and will it be sustainable enough for them to continue running throughout the remainder of the year?

If the circuit that would be created is just suited to the bikes, then meetings at the Circuit of Wales would more than likely be rare. MotoGP, World Superbikes and British Superbikes would all be big events, but would result in three meetings. What about racing at a club level otherwise?

The Circuit would have to count on the likes of club meetings (that are usually once a month seasonally) and track days amongst other events. With the location being so secluded in a way, how are they planning to generate an income throughout the year otherwise? They would be relying on a small, specific group of people to keep it going and take an already expensive enough hobby and add more expense; be those travel and entry fees. Anyway, see you all at Silverstone in August!