Former Permanent Secretary to the Scottish Government, Sir John Elvidge says the Scottish National Investment Bank (SNIB) needs a relaxation of its financial constraints, including an ability to raise capital in its own right.
In a new report, Sir John urges the Holyrood government to collaborate with Westminster to create the conditions for that will ensure the state-owned bank’s long-term role in the financial landscape as a “matter of strategic priority”.
He was commissioned to examine SNIB’s performance over its first five years and assess its progress against its statutory objectives and missions.
He states that ministers need to “decide and give a clear steer on where, how and how far it wants the Bank to pursue the third party capital route.”
This was an issue that former Finance Secretary Kate Forbes was keen to achieve.
Sir John warns of an “urgency” to resolve issues around the bank’s ability to become a “reliable source of long-term and repeat funding”, explaining there will be “negative consequences” if it is not clearly established and understood externally within the next year or so.”
He writes: “Having to deploy capital effectively within the constraints of the public finance framework, which mean operating with annual financial contributions which must be deployed within the same year, with very limited ability to carry unused funds from one year to the next, has created significant inflexibility in the Bank’s operations, running the risk of distorting decision-making.
“And having to operate in the marketplace without certainty as to the existence of the organisation beyond 2030 is presenting increasing challenges in terms of forming and managing long-term relationships of trust and confidence with investees and co-investors alike.
“It will require action by both the Scottish and UK Governments to give the Bank the ability to manage, retain, carry forward and redeploy cash balances across years; and also to raise capital in its own right, so that it is no longer reliant on continuing capital advances from the Scottish Government beyond 2030.”
Sir John also warns that the SNIB will be watched closely by investors over the success of setting up a new university spinout fund, noting it will test “its attractiveness to private investors and also of the extent to which the Bank and Scottish Enterprise are able to develop a strong, clear, credible, and mutually complementary partnership approach in this area.”
The former civil servant questioned its role in housing development, finding no evidence of the medium-long term impact of housing investment on regional and local economies, “except where it unlocks a major strategic industrial development,” arguing that its choice to invest in housing did not speak to the “transformational ambition” expressed by the Government.
“One question that has been raised with me both by investees and by co-investors in relatively early stage businesses is whether the Bank’s structural terms are fully aligned with its positioning as a relatively high-risk investor seeking to crowd others in: or whether in some respects, in particular the downside protections, they might in fact be more onerous than the circumstances require.”
Willie Watt, chair of the Bank, said: “The review recognises the scale of what has been achieved since the Bank was established. Over the past five years, we have built a new institution in a period marked by significant economic uncertainty and change, while remaining focused on delivering long-term impact for Scotland.
“Importantly, the review not only reflects on our progress to date but also provides thoughtful recommendations to help shape the Bank’s future development. We are encouraged that many of its themes align closely with the direction set out in our recently published Investment Strategy and Business Plan. While strong progress has been made, we recognise that there is more to do.”
Economy Secretary Stephen Flynn responded by saying; “The review concludes that the Bank has made strong progress since its inception, deploying over half of the £2 billion in capital funding that has been committed to 2030.
“It has successfully established itself as a mission-led development bank and has already made an important contribution in supporting investment across Scotland. The findings reinforce those of Audit Scotland’s report published in May 2025.
“The Scottish Government has discussed the review’s findings with the Bank and agrees on the key areas for action. Together, we are developing a clear plan to take forward the recommendations, many of which are already underway, with defined responsibilities and timescales.
“The next phase of development will focus on maximising the Bank’s impact, helping more businesses to scale up and innovate, unlocking investment in housing and infrastructure, and supporting the creation of high-quality jobs across Scotland.”
To date, the Bank has committed £1.16bn with 53 live investments: 31% in debt, 34% in combined debt and equity, and 10% in equity; and it invested 25% in funds. It has yet to issue any guarantees.
Its smallest investment to date was £700,000; its largest £70 million. A quarter of its investments were under £5m; a fifth of its investments were more than £45m; but the largest proportion ranged between £5m and £45m.
#Elvidge #calls #relaxation #SNIBs #financial #rules #Daily #Business