Thank you. I’d like to update Members on progress with the Circuit of Wales project following a meeting I had earlier today with Michael Carrick, chief executive officer of the Heads of the Valleys Development Company and Martin Whitaker, chief executive officer of Circuit of Wales. As Members will be aware, we have been working with the Circuit of Wales and providing financial support to develop this project over a significant period of time. We recognise the potential positive economic impact it could have for Wales, and Ebbw Vale in particular. It is a large undertaking and we have always been clear that any support provided by the taxpayer needs to be proportionate and fair.

The Heads of the Valleys Development Company was established in 2009 and has subsequently developed plans to create an automotive cluster, centred on a performance racing circuit designed to host international motor sports events. The racetrack is planned to be situated just north of the Rassau industrial estate in Ebbw Vale, with the aim of attracting a range of two and four-wheel racing events, including Moto GP, with a target of attracting three quarters of a million visitors a year within three to five years of start-up. The project is forecast by the developer to create 300 full-time equivalent jobs, consisting of 49 full-time roles and 3,500 part-time temporary staff for events. There would also be employment opportunities created during the two years the track would be under construction.

The often publicly quoted claim of 6,000 jobs is predicated on the assumption that additional jobs would be created by businesses, particularly in the engineering and automotive sectors, clustering alongside the circuit and also by other employment multipliers such as hotels and catering. The main benefit to the Welsh economy would be derived from the future investments that might be expected to be created by the existence of the circuit, but, accordingly, this involves a degree of uncertainty and can only be seen as a long-term aspiration.

The Welsh Government has been engaged with the Heads of the Valleys Development Company since 2011, since when the company has sought financial support from us at each key stage in the project’s development. It is important to remember that when this project was first presented to us, we were told it would be one that would be fully funded by private sector risk capital without the need for a Government guarantee. At that stage we made a commitment to part-fund the project development and agreed to grant aid of around £16 million towards certain aspects of the circuit project, primarily to support the creation of jobs. This grant aid was conditional on the Circuit of Wales raising the necessary private finance. Unfortunately, despite the best efforts of the company, they were unable to raise the stated private investment and, accordingly, they have been unable to draw down this grant.

Earlier this year the Circuit of Wales asked us to consider a new proposal with an alternative financing structure. Their plan sought a Welsh Government guarantee to underwrite 100 per cent of a project finance facility provided by Aviva Investors of £357.4 million. This level of guarantee would have increased the exposure to risk of the Welsh Government by around 15 times.

In April, my predecessor, the then Minister for Economy, Science and Transport, decided that it would be an unacceptable risk to underwrite the entire £357.4 million investment for the project, but stressed that our door remained open if sufficient private investment could be secured that presented a fair share of risks between the public and private sectors.

The developer submitted a revised proposal for discussion in mid-April, which, following observations from Welsh Government officials, was further refined and resubmitted at the end of May. The latest proposal has been presented by some commentators as a solution where the majority of the funding is coming from private finance. However most of this funding still requires a Welsh Government guarantee, and taken in conjunction with loans provided by local authorities, the public purse still holds the majority of the risk.

Including both direct Welsh Government guarantees and local authority loans, the latest proposal put forward by the Circuit of Wales asks Welsh Government to underwrite around 75 per cent of the total £370 million cost of the project, with local authorities underwriting a further 8 per cent. Unfortunately, despite the efforts of the project backers, this leaves only around 17 per cent of risk being taken by the private sector.

That amount of risk falling on the Welsh taxpayer, through Welsh Government and local authority support, is unacceptable as it currently stands, especially at a time when we are facing significant economic uncertainty from a UK exit from Europe. In our view, this project does not currently provide the level of value for money necessary for the amount of public funding being put at risk. On that basis, I have today told Michael Carrick and Martin Whitaker that I believe further work is needed on this proposal. My door remains firmly open and I’ve urged them to revise their bid in such a way where the private sector takes more of the risk in order for this project to be taken forward.

We need to see at least 50 per cent of this project funded and 50 per cent of the risk underwritten by the private sector to justify value for money for Welsh Government and the public purse and they have accepted this principle. My officials will now work constructively with the Circuit of Wales team to ensure this project can be successfully delivered to benefit the local economy of Ebbw Vale and Wales at large.