A “rotten deal” by the Scottish Government saw a Canadian firm take on a majority share in the BiFab yards for just £4, MSPs have been told.

Economy Secretary Fiona Hyslop came under fire for the deal, agreed in 2018 with manufacturer DF Barnes.

That saw Holyrood ministers invest £37 million in BiFab – which has now gone into administration – with the Scottish Government becoming a minority shareholder.

The Government then went on to provide further help in the form of loans to the struggling engineering firm, which has yards in Burntisland and Methil in Fife, as well as one on Lewis.

But since DF Barnes took over in 2018, BiFab has secured just two contracts, MSPs on Holyrood’s Economy Committee heard.

As a result, Ms Hyslop said there were “concerns they were not in a position to have a future pipeline of activity and work”.

The Economy Secretary said the Scottish Government “were certainly prepared to provide that financial support had they been in a position to have that continuous pipeline”, adding it was “very disappointing” BiFab did not win a recent contract for part of the Seagreen wind farm development.

Ms Hyslop said: “It’s the viability of the company that is an issue which has led the board themselves to seek administration.”

BiFab announced earlier this month it was entering administration after Scottish ministers ruled out nationalising the company, saying it would be unlawful under state aid rules to continue financially supporting the yards.

Clearly we wanted that company to be successful under the ownership of DF Barnes and JV Driver. That hasn't happened

Questioning Ms Hyslop about the deal, Tory MSP Graham Simpson said: “We, the Scottish taxpayer, get a minority stake in the company and not even a seat in the board, and the Canadian company for £4 gets a majority of the company.

“It seems to me a pretty rotten deal if the taxpayer is putting in the vast amount of money, £37 million plus extra which takes it up to £52 million. You get a minority stake. The other side of the deal £4 for 67% share of the company. That is a rotten deal.”

Ms Hylsop said at that time the only other alternatives were to let the company fail or for the Government to take it into state ownership, saying this was “something that the ministers involved at that point did not want to do”.

She said: “What we were bringing in was their (DF Barnes) expertise, their acumen, their knowledge of the market, that they would be the board that could run the company, that we would not be directly involved in running the company, they would be responsible for that.”

The Economy Secretary insisted that when the deal was done there had been “assurances” from the Canadian firm they could “achieve and deliver major contracts” for the yards.

Ms Hyslop insisted that as a minority shareholder the Scottish Government had been “exhaustive” in considering options to support BiFab.

“We were trying to get them to get third-party investment, to try to find ways of improving their cashflow proposition,” Ms Hylsop said.

She stated: “Clearly we wanted that company to be successful under the ownership of DF Barnes and (investment group) JV Driver. That hasn’t happened.”

The administrators are now trying to sell the company as a going concern, Ms Hylsop added.

But she stressed the Government had expected the Canadian firm, as majority shareholder, to provide greater financial support.

Earlier this month, DF Barnes vice-president Sean Power told the committee ministers had “understood” the company would not be providing a large amount of cash for BiFab.