Page last updated at 09:36 GMT, Thursday, 8 October 2009 10:36 UK

Risks to funicular 'not reviewed'

CairnGorm Mountain funicular railway
Building and operation of the railway has cost 26.75m so far

A decline in skiers was among risks to a mountain railway not taken into account before it was built, according to a new Audit Scotland report.

The public spending watchdog investigated Highlands and Islands Enterprise's (HIE) backing of the Cairngorms' funicular.

Opened in 2001, construction cost £19.5m - almost £5m more than expected.

HIE said the funicular was a key element of attempts to regenerate tourism in the area.

The railway connects a base station with the Ptarmigan Restaurant 1,097m up CairnGorm mountain. It is used by skiers and tourists.

HIE took over the railway from operator CairnGorm Mountain Limited (CML) last year.

Since construction work started in 1999, the building and operation of the funicular has run to more than £26.75m.

Highlands and Islands Enterprise did not fully take account of new risks that emerged early on in the project
Robert Black
Auditor General for Scotland

Most of the funding has come from HIE which has spent £19.42m, followed by £3.26m from the Bank of Scotland, £2.61m of European Union grant aid, £1m from Highland Council and £100,000 from the Cairngorm Trust.

In its report, Audit Scotland said the railway had met expectations of creating employment and attracting tourists.

But prior to construction, the watchdog said HIE had been focused on the project's design and controlling costs but had not taken account of, or reviewed, changes affecting skiing and operator CML.

At the time the number of skiers using slopes in the Cairngorms was in decline.

In 1997, 97,000 skiers used Cairngorm but this fell to 75,000 in 1998, according the report.

The business case put together in support of the project had assumed 186,000 ski visitors per year.

CML was also struggling financially, said Audit Scotland.

In 1997 and 1998, the company reported losses of £607,000 and £625,000.

Also contained in the report are the £30m-£50m "speculative" costs of shutting down the railway and dismantling it.

'Must learn'

A condition of its planning permission is that if the funicular does not operate for a period of 12 months - or longer if agreed with Highland Council and Scottish Natural Heritage - it should be removed and the land reinstated to its original state.

If this happens, the project's EU funding would also have to be repaid.

Robert Black, Auditor General for Scotland, said the building of the funicular was seen as key to regeneration of the area and was expected to contribute to increased tourism and employment.

He said: "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."

Mr Black said following its takeover of the railway the agency "must learn from its experiences to date".

He added: "It must fully assess the risks, review the current performance and develop clear objectives."

HIE's acting chief executive Sandy Brady said the funicular was at the heart of attempts to boost tourism in the wider Strathspey area.

He said: "It sits alongside the redevelopment of Aviemore, it sits alongside the creation of the Cairngorm National Park.

"It is very much part and parcel of modern Highland tourism appeal."

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