The Scottish National Investment Bank (SNIB), a state-owned financial institution launched in 2020, is projected to incur losses exceeding £110 million due to failed investments in several companies. An independent review of the bank's performance revealed that financial setbacks have occurred across six projects it supported.
Up to the end of March of the current year, the bank had recorded £73 million in losses stemming from the collapse of four invested firms. An additional £37 million in losses is anticipated from two more investments in companies that have since entered liquidation or administration, according to a five-year review conducted by Sir John Elvidge. The review also noted that there will be an "additional sum of as yet unrealised losses."
Sir John Elvidge, the former Scottish Government Permanent Secretary, stated in his review that the losses are understandable and will likely trigger public and political concern. He urged the bank's leadership to ensure that "the right lessons" are learned from each unsuccessful investment.
"These staggering losses raise serious questions about the SNP’s flagship investment bank," said Scottish Conservative finance spokesman Craig Hoy. "This was supposed to be a beacon for driving economic growth in Scotland, but instead failed investments have left taxpayers footing a huge bill that is only continuing to increase."
The SNIB confirmed that the investments leading to the initial losses included Circularity Scotland, a firm established to manage Scotland's deposit return scheme; Glasgow-based technology firm M Squared Lasers; satellite technology company Krucial; and electric vehicle charging company Trojan Energy. The two more recent losses involve Orbex, which was intended to operate a satellite launch facility in the northwest Highlands, and medical technology firm Pneumowave.
According to Sir John's report, a total of £1.16 billion has been committed to date, with 53 live investments. Regarding the failed investments, he commented, "Each investment failed for a particular combination of specific reasons. And it is difficult to express a general view with any confidence as to whether the overall level of losses, while considerable, is higher than might have been expected from an institution in its start-up phase. I heard views from external investment professionals that it was not."
He added, "Given that Bank investments are funded by the taxpayer, it is nevertheless entirely understandable that there has been some public and political concern about the losses; and it is right that the bank should stand ready to defend its record. It is also valuable that the Bank has had consistent support from Scottish ministers on this front." He stressed the importance of the bank's leadership learning from these experiences and implementing measures to address any shortcomings in policies, processes, or actions.
The review also pointed out potential conflicts between pursuing commercial returns and the broader objective of fostering economic activity. It recommended that the Scottish Government, SNIB, and Scottish Enterprise clarify their respective roles, as concerns about a "lack of clarity" have been raised. Ministers are expected to present a clear plan of action and a timetable for the bank by early next year.
Investments made by SNIB have ranged from £700,000 to £70 million, with roughly half concentrated in Edinburgh, Glasgow, and Aberdeen. Investment in the south of Scotland has been comparatively limited.
Economy Secretary Stephen Flynn stated that the Scottish Government has discussed the review's findings and agrees on the necessary actions. "Together, we are developing a clear plan to take forward the recommendations, many of which are already underway, with defined responsibilities and time-scales," Flynn said. He outlined that the next phase will focus on maximizing the bank's impact by assisting businesses in scaling up, promoting innovation, and supporting investment in housing and infrastructure to create high-quality jobs across Scotland.
Willie Watt, chairman of SNIB, acknowledged that while progress has been made, there is more work to be done. "We are committed to learning from the review, building on our strengths and continuing to evolve as an institution delivering lasting economic and social impact for Scotland," Watt commented.