How Nicola Sturgeon’s publisher was repeatedly rescued by Creative Scotland & Highlands & Islands Enterprise, enabling the unviable company to lose £0.5m public money yet still publish her speeches using cash derived from public bodies while HIE’s £0.175m loan has not been repaid

The fact that unviable Sandstone Press is using money derived from public bodies to publish and market a book of speeches by Nicola Sturgeon may be inconvenient – for her, Creative Scotland and Highlands & Islands Enterprise.
It is a fact nonetheless.

Key points

Sandstone versus every other literature publisher in Scotland

Previous post re the Sandstone/CS funding scandal…

We have previously evidenced how CS facilitated Sandstone’s funding by ignoring its false claims.

Sandstone’s entire balance sheet value derives from public funding

Without the £0.5m cash banked from public bodies, Sandstone would have had negative net assets of £0.428m at 31 Dec 2019; i.e. it had already been enabled to lose £0.428m public money to that date. So, all of the value on its balance sheet derives from public funding.

That, of course, assumes that HIE’s £0.175m loan will be repaid in full. The chances of that are vanishingly small given the company’s inability to make a trading profit.

We believe the loss to taxpayers is now £0.5m+ given:
  • £70k May 2020 rescue by HIE
  • apparent further HIE rescue in Sep 2020 (cost to taxpayers unknown)
  • its 2018/19 accounts cover 15 months and include 2 Xmas sales periods versus 1 Xmas returns period; returns at the start of 2020 will have substantially reduced debtors, especially as the period in question marked the start of the pandemic
  • losses from the collapse of wholesale Bertram Books

Sandstone’s long history of trading losses

Sandstone has made trading losses every year since 2006 bar 2013-14. Those losses total c£0.5m. It is, and always has been, unviable.

No other literature publisher in Scotland has lost as much.

Net assets less cumulative public funding = trading loss/profit, assuming (which we understand to be the case) no dividends have been taken.

Sandstone’s public funding to May 2020:

  • £0.41m cash from CS
  • £0.09m cash from HIE
  • £0.175m 3-year loan from HIE that we believe has capital and interest repayment holidays for its full duration, judging from the Grant Equivalence Value ascribed
  • apparent COVID19 Legacy Project funding, value unknown – may be funding for FD that CS claimed when it approved funding in April 2019 ‘will be appointed in Spring 2019’ but was then not appointed.

Did HIE ignore Sandstone’s IV2 business location to rescue its own loan?


MORE funding from CS than any book publisher.

MORE funding from HIE than any book publisher.

ONLY book publisher to receive PERF (£70k).

ONLY book publisher in Scotland to be granted a loan by a public body (£0.175m from HIE, not repaid).

ONLY publisher of Nicola Sturgeon’s speeches.

The layout of HIE’s assessment of Sandstone’s PERF application appears to show that HIE deliberately ignored the company’s IV2 7PA business location to ensure it was funded when it would not have been otherwise.

Had Sandstone not been funded, HIE would almost certainly have had to write off its loan, advanced against thin security.

Just need to find another 3 points…

HIE recommended that applications scoring fewer than 12 points be automatically rejected. Based on the assessment layout, here’s what we believe HIE awarded versus what it was entitled to award.

Geographic Location is a matter of fact. Sandstone’s business location was IV2 7PA. That seems not to have generated sufficient points to allow HIE to provide more funding, so it appears that it awarded 4 points for IV2 7PA even though the correct award was 1 point.

If our inferences based on the layout are correct, it was the difference between a pass and a fail. Sandstone was entitled to 9 points (FAIL) but was awarded 12 (MARGINAL PASS) because that was the outcome HIE needed to protect its reputation and avoid writing off the at-risk loan it had awarded a year earlier.

Above is the Geographic Location section of HIE’s assessment of Sandstone’s PERF application. Compare the placing of the ‘[Redacted]’ score next to 4pts above (2nd option down) versus its positionings in the other 3 sections below. As with the Financial Assessment page, it is not in the middle, rather next to a specific box.

HIE has previous form when it comes to making things up to keep Sandstone afloat

HIE recently had to issue a formal apology to one-time Sandstone non-executive director Iain Gordon – a CA and former shareholder in the company. He resigned because of the company’s dire financial position and the executive directors’ refusal to address its unsustainable overheads. That narrative did not suit HIE. Needing to deflect from the fact that the executive directors who owned and ran the business were responsible for its losses, it scapegoated Iain Gordon instead, making up clams for that were without foundation. It presumably thought that no one would check.

HIE’s £0.175m loan: at risk from the outset

HIE loaned Sandstone £0.175m in March 2019, supposedly as Growth Aid even though the company over ever (bar 2015) made trading losses enabled by £0.4m CS funding. Those losses were increasing alarmingly.

While HIE’s assessment claims that the loan was working capital intended to help the company achieve long-term sustainability, none of the measurements for the project addressed the company’s inability to trade profitably. Instead, they related to increasing turnover but also increasing still further the already-unsustainable overhead.

If the future for Sandstone was so rosy, why were its two owner-directors not asked to express their confidence in it injecting fresh equity? It would certainly have focused their attention on sustainability. Neither injected equity. Neither was required to. Instead, they were handed even more public money to lose. They are now spending some of that money promoting the leader of the party the MD/majority owner openly supports. (Fine were it his money, but it’s money derived from taxpayers being used for a political purpose during purdah for the Scottish Parliament election in May 2020.)

Was there/is there much security for HIE’s loan?

In a word, no.

HIE took a floating charge over Sandstone’s assets. As it has almost no fixed assets, that security is over cash, stock and debtors.

There will be no cash in the event that HIE calls its loan – it won’t call it if there is. Stock will be all but worthless in a fire-sale situation.

That leaves only debtors. BUT, keep in mind that the book trade operates on a ‘sales or return’ basis. Debtors could be significantly reduced by a wave or returns. Debtors are not the security they appear to be.

for it was incredibly thin; and what little there was would almost certainly be worthless in the event that HIE called its loan.

Concerningly, Sandstone – not HIE – seems to control drawdown of the loan. It had already drawn down £95k at 31 Dec 2019. Presumably, given its supposed need for PERF just a year later – more may have been drawn down.

Is Sandstone capable of repaying HIE’s loan?

Highly unlikely. The loan assessment states that drawdown of the loan is based on need, not the achievement of targets. The company has always burned through cash at an alarming rate because of its refusal to address its unsustainable overhead. It has used its rescue funding to increase its overheads still further, taking on a new office in Inverness and more staff it cannot afford.

If HIE added £70k PERF to Sandstone’s its balance sheet by awarding 4 points for Geographic Location versus the 1 to which the company was entitled, it would be a clear sign of utter desperation on HIE’s part.

EU Commission notified of possible State Aid breaches by HIE & CS

HIE recognised its March 2019 rescue of Sandstone as State Aid, but did not acknowledge that it had provided Rescue Aid. Instead, it badged its rescue as Growth Aid…to a company that was shrinking because of increasingly large trading losses.

CS had provided significant funding to Sandstone in the previous 3 years. HIE then provided a 3-year £0.175m rescue loan with repayment holidays before injecting £70k PERF cash in May 2020 (possibly by awarding points to which the company was not entitled).

Two questions arise:

Did the total State Aid provided exceed the allowed maximum?

Was Rescue Aid provided?

This matters because Rescue Aid must be provided in accordance with the ‘one time, last time’ principle. No further Rescue Aid can be provided until the original Rescue Aid has been repaid in full.

If HIE’s Mar 2019 loan was Rescue Aid then all subsequent Aid breached State Aid rules. That would include not only its May 2020 £70k PERF award and apparent Sep 2020 award but also CS’s £30k April 2019 rescue.

HIE’s £0.175m rescue loan has not been repaid. Our understanding is that it is not due to be repaid until Mar 2022.

Firm in difficulty: a firm is regarded as being in difficulty where it is unable, whether through its own resources or with the funds it is able to obtain from its owner/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to going out of business in the short or medium term.


In March 2019, Sandstone was unable, through its own resources or with funds from its owners or creditors to stem losses which, without HIE and CS intervention, would have condemned it to go out of business in the short or medium term. At imminent risk of running out of cash again, it was the definition of a ‘firm in difficulty’.

Why did HIE not recognise it as such? Its historical financials made it clear as did CS’s assessments. CS offered to share with HIE details of the company’s applications. (Source: email correspondence (FOI) between CS and HIE.)

Perhaps HIE recognised that the £0.175m loan it was providing was never going to be enough to prop up the failing company, so labeled its rescue Growth Aid to ensure that more could be offered when required. And then more after that too. Acknowledging that it was providing Rescue Aid would have shut the door on subsequent rescues.

Fiona Hyslop’s refusal to act on information provided has resulted in further loss of public money

Cabinet Secretary was told of false claims by Sandstone made when it obtained £0.2m from CS & HIE, and of non-disclosure of interest by non-exec she chaired on Creative Industries Advisory Group
  • With Fiona Hyslop’s blessing, Sandstone non-exec/advisor Jenny Todd has been enabled to remain the Creative Industries Advisory Group despite failing to disclose her Sandstone non-exec directorship or advisory role.
  • Todd uses her CIAG membership to lobby for Sandstone and meets CS and HIE’s Directors of Creative Industries (both CIAG observers)
  • Todd & Sandstone lied that she was its non-exec 15 months after she had resigned – Hyslop’s civil servants claimed the false claim was a mistake. It was a false claim made while obtaining £0.2m of taxpayers’ money.
  • CS repeated the false claim, presenting Todd’s appointment as its mitigation for Sandstone’s 2017/18 £0.1m trading loss

Key names

Scottish Government

Nicola Sturgeon: First Minister, Scottish Government
Fiona Hyslop: Cabinet Secretary for Economy, Fair Work and Culture, Scottish Government
Jamie Hepburn, Minister for Business, Fair Work & Skills

Sandstone Press Limited

Robert (Bob) Davidson: Publisher & majority shareholder
Moira Forsyth: Publishing Director & minority shareholder (together she and Bob Davidson own 100%)
Jenny Todd: non-exec director May18-Jan19; thereafter advisor (despite falsely claiming, in writing, to still be its non-exec despite acknowledging her resignation); CIA member

Creative Scotland (CS)

Ian Munro, CEO
Ian Stevenson, Finance Director (Claimed ‘accuracy of an applicant…is not relevant to the funding decision’ after Sandstone obtained CS (& HIE) funding while claiming a non-exec it did not have but whom CS cited as prime mitigation for the company’s a £0.1 trading loss. The claim was a lie, not inaccurate.)
Clive Gillman, Director of Creative Industries
Alan Bett, Interim Head of Literature, Publishing & Languages

Highlands and Islands Enterprise (HIE)

Charlotte Wright, CEO
Iain Hamilton, Director of Creative Industries
James Gibbs, Area Manager: Inner Moray Firth