The North East Scotland Investment Zone Joint Committee met on Friday, 21 August 2026, to discuss programme updates and address significant financial and subsidy control risks. The committee agreed to make programme updates a standing agenda item and requested a further report on these risks to be presented at the next meeting. Three business cases were approved: the National Energy Skills Accelerator, the Supply Chain Pathway and Challenge Fund Programme, and Empowering Digital Transformation: Advancing Data and AI in North East Scotland.

NESIZ Programme Update

The committee received a comprehensive update on the North East Scotland Investment Zone (NESIZ) programme, which currently comprises 16 projects with a total anticipated value of £124 million in Investment Zone funding. The programme, now in its second year after a delayed start, faces several strategic risks.

A significant concern is the misclassification of capital and revenue expenditure. It was identified that approximately £19.6 million of grant funding currently classified as capital may need to be reclassified as revenue, which would disrupt the required 60:40 capital to revenue split mandated by the UK Government. Mary Beattie, the Section 95 Officer, explained that expenditure classifications must adhere to International Financial Reporting Standards (IFRS), as reflected in the CIPFA/LASAAC Code of Practice on Local Authority Accounting, and that this is not a discretionary decision. Professor Nick Fyfe and Professor Pete Edwards raised concerns about inconsistent advice on capitalisation provided earlier in the process, which had caused confusion for institutions involved in developing interventions. The committee was informed that discussions with the UK and Scottish Governments are ongoing to address this issue.

Another key risk relates to subsidy control, particularly the absence of a dedicated government scheme for green energy and environmental projects. This means that each intervention may require an individual principles assessment, which is time-consuming and could impact project timelines. Martin Brebner, Team Leader for Planning and Economy, stated that detailed analysis from the government is awaited to determine the next steps.

A projected underspend of approximately £9 million for the 2026-27 financial year was also highlighted. With only £3.1 million forecast to be spent from the £16 million available, and a carry-forward cap of 30% allowed under the Memorandum of Understanding (MoU), a significant portion of funding is at risk unless further agreement is reached with the government. Mitigation options are being developed by the Programme Board.

The committee was updated that the tax sites are operational, with investor interest being actively tracked. The £5 million Scottish Government Skills Fund is set to soft-launch, with projects expected to commence in January 2027.

The committee agreed that the NESIZ Programme Update would become a standing agenda item and requested that a report on key risks and mitigation actions be presented at the next meeting. Councillor Anne Stirling, Chair of the Joint Committee, along with Councillor Christian Allard (Vice-Chair) and Stanley Morrice, will seek a meeting with government officials to discuss the capital/revenue and subsidy control issues.

Business Case Approvals

The Joint Committee unanimously approved three business cases:

• IZ07 National Energy Skills Accelerator: This project aims to address skills needs within the green energy and digital technology sectors. Approval was subject to the resolution of outstanding technical issues to the satisfaction of Aberdeenshire Council's Head of Finance.
• IZ08 Supply Chain Pathway and Challenge Fund Programme: This initiative focuses on developing the supply chain within the region. Approval was conditional on the resolution of outstanding technical issues to the satisfaction of Aberdeenshire Council's Head of Finance.
• IZ09 Empowering Digital Transformation: Advancing Data and AI in North East Scotland: This business case seeks to advance data and AI capabilities in the region. Approval was granted subject to the resolution of outstanding technical issues to the satisfaction of Aberdeenshire Council's Head of Finance.

The approvals for IZ07 and IZ08 were also noted as having direct implications from the identified key risks, particularly concerning capital/revenue treatment.