Funicular railway still a challenge for HIE

An Audit Scotland report, Review of Cairngorm funicular railway, examines the involvement of Highlands and Islands Enterprise (HIE) with the project over a 17-year period. This covers the original project development and the decision to build the funicular, through to HIE’s decision last year to take it into public ownership. The report also provides an update on HIE’s progress in developing a new business model for the funicular.

The decision to invest in the Cairngorm funicular was taken over a decade ago in 1997. The process complied with guidance and procedures at the time, but HIE did not take account of new risks that emerged before construction started. It has cost much more to build the funicular than expected but consultants’ reports indicate it has delivered the anticipated employment and wider benefits.

The Auditor General for Scotland, Robert Black, said:

“When the Cairngorm funicular was first considered it was seen as key to regeneration of the area, and was expected to contribute to increased tourism and job creation. Many of the expected benefits have been realised. However, Highlands and Islands Enterprise did not fully take account of new risks that emerged early on in the project, and the construction of the funicular cost about one-third more than expected.”

“HIE has taken over the funicular and operator and is now developing a new business model. In doing this, the agency must learn from its experiences to date. It must fully assess the risks, review the current performance and develop clear objectives.”

The Cairngorms were, and remain, the main location for skiing in Scotland but in the early 1990s the area was in decline as a tourism site. At the time the funicular project was first developed, HIE saw it as key to the regeneration of Aviemore and the wider Strathspey area. Today’s report says the decision to build the funicular was taken after a process which met the requirements of the time. HIE was aware of a number of risks, such as limited private sector investment and declining skiing numbers, but believed the funicular would bring economic benefits to the area.

However, additional risks emerged after the project was approved and HIE did not review the business case before the building work began in 1999. It cost £19.5 million to build the funicular, almost £5 million more than expected. Consultants report the project has delivered the anticipated employment and wider benefits to the Strathspey area.

Another £7 million was provided to support the operator and develop the attraction, mainly by HIE, the Highland Council and the Bank of Scotland. The operating company has struggled financially since the funicular’s opening. In May 2008, HIE took over the operator to protect the public’s investment and to keep the funicular open. It is working with consultants to develop a new business model for the funicular.