Scotland’s national investment bank is running aground

Like so many SNP Scottish government initiatives, it was launched to great fanfare but has made questionable progress since. Established in November 2020 as an investment vehicle for delivering long-term, ‘patient capital’ to Scottish businesses, the creation of the Scottish National Investment Bank (SNIB) was described by Nicola Sturgeon as ‘one of the most significant developments in the lifetime of this parliament.’

The ‘mission-led development bank’ is being funded by the Scottish government to the tune of £2 billion over ten years. However, a new report from the St Andrews university academic professor Ross Brown, published by the think-tank Reform Scotland, suggests the institution will fail to have any significant impact on Scotland’s economy if its fundamental remit and aims are not re-assessed.

Brown’s paper argues the bank has no clear set of missions to coalesce around. The original blueprint for the institution discussed the UN’s 17 sustainable development goals but stated that they were ‘too broad to be actionable’. It also referred vaguely to the 81 economic, social and environmental performance indicators adopted by the Scottish government under its National Performance Framework.

A high-level outline like this is fine when an organisation is originally setting out its broad aims, but this lack of detail appears to have set the tone for the development of the institution through to today. At its launch, the bank’s missions were listed as: ‘supporting Scotland’s transition to net zero, extending equality of opportunity through improving places, and harnessing innovation to enable Scotland to flourish’.

As the Brown paper notes, ‘By focusing on vague heuristics and broad missions, SNIB looks rather unfocused and ill-conceived, which is reflected in the rather heterogenous and very small number of projects currently being funded by the bank.’

Is the bank designed to promote the development of green infrastructure, or is it focused on state-backed venture capital to get small and medium-sized enterprises with significant growth potential off the ground? It seems to be a bit of this, a bit of that, with no real clarity on what types of deals it should pursue.

A total of 15 projects have been funded by SNIB to date, totalling just over £200 million in investment. Of these, a relatively small amount of cash has gone to start-ups requiring venture capital type funding, while big chunks of cash have gone to fund other organisations that deploy capital (£50 million to an asset management company investing in forestry, for example).

Might the SNIB be struggling to find projects to invest in? The Ross paper notes: ‘It appears that the volume of interest in terms of enquiries regarding funding has been relatively limited since its inception in 2020.’ Up until February this year there had only been 105 enquiries to the SNIB about funding.

On top of this, the bank’s first chief executive abruptly and mysteriously stepped down less than two years into the role. Eilidh Mactaggart left her job at the end of January. A public announcement on the departure didn’t happen until 25 February, with no explanation given as to why she had left. It subsequently transpired that official briefing documents for Scottish ministers had instructed them to say the government had been informed of the resignation on 18 February, but it then came out that Willie Watt, the bank’s chair, had in fact advised Scottish government officials of the resignation on 31 January.

More intriguing still is the fact that Mactaggart received an exit payment of £117,500 instead of working her notice. No explanation has been given for this. When asked about it, the Scottish government deflect to the bank’s board. However, writing earlier this month to the Scottish parliament’s Economy and Fair Work Committee, Watt said he was ‘unable to provide any further detail’ on why the pay-out was given.

After several weeks of increasing controversy on her departure, Mactaggart herself put out a short statement in early March insisting it was for personal reasons, but the full story remains a mystery.

With the ferries fiasco still ongoing, Scotland’s railways in chaos, and with a history of industrial debacles to its name, the SNP (now SNP-Green) administration has always looked out of its depth when it comes to business and the economy. Its growing reputation for secrecy and subterfuge isn’t helping matters.

As professor Brown notes: ‘If Scotland is to become a genuinely ambitious, entrepreneurial, so-called “start-up nation”, public policy in Scotland will have to become much bolder and imaginative than at present. To do this, the Scottish government needs to hit the reset button on SNIB.’

If it doesn’t receive some remedial action soon then the SNIB is in danger of becoming yet another case of expensive PR by a government seen to have little interest in delivering a better economy for the people of Scotland.