Scottish National Investment Bank: Taxpayer nursing £77m ‘paper loss’ in year of ups and downs
“We will navigate conducive and challenging economic climates with a focus on delivering long-term societal and economic impact” – Willie Watt, chairman
The taxpayer-owned Scottish National Investment Bank has flagged a “healthy pipeline” of opportunities as its latest accounts revealed a paper loss of £77 million amid a tough economic backdrop.
SNIB was set up in 2020 to invest in companies and projects with potential to deliver both “financial returns and societal benefits”. It is wholly owned by Scottish Government ministers, on behalf of Scottish taxpayers, but operates independently from government.
Publishing SNIB’s latest annual report, chairman Willie Watt said “continued progress” had been made in developing the bank’s capabilities and investment portfolio in the face of a “challenging economic context”.
For the second year, the bank’s income of £34.5m exceeded its operating costs, at £16.2m, with income increasing by 78.8 per cent year-on-year, while its portfolio grew to 42 businesses and projects. In the year under review, it committed £145m and “crowded in” a further £324m, meaning the bank has leveraged its capital to increase additional investment in Scotland.
Since it was launched in November 2020, SNIB has committed more than £785m and crowded in a further £1.4 billion.
However, the bank warned that many of the ventures it had invested in were operating in a challenging economic environment, contributing to an unrealised or paper loss of £77m due to valuation changes within the portfolio. There were no realised losses.
The bank’s commitment (£145.1m) and deployment figures (£157.5m) for the year were both below its targets, but it noted that this year also marked the first time that the Scottish Government has awarded greater flexibility to the institution’s annual investment budget.
Chief executive Al Denholm said: “Investment opportunities don’t come to us in a linear way, and we would never compromise our robust due diligence process to rush a deal through before the end of a financial year.
“The challenge we have in making investment decisions within the constraints of a yearly budget cycle was an issue highlighted in Audit Scotland’s report on the bank. We are, therefore, very pleased the Scottish Government has introduced greater flexibility, enabling us to carry over some investment budget allocation. Looking forward, we have a healthy pipeline of investment opportunities.
“We hold our investments over a longer term and would expect to see our valuation change and level off as our portfolio matures,” he added.
Watt said: “Ongoing market volatility has followed years of geopolitical and economic uncertainty, creating a challenging environment for growing businesses and investment. In these difficult economic times, the role of a development bank is even more important.
“We have a long-term goal of developing a vibrant, self-reinforcing and high-investment ecosystem in Scotland that makes a lasting contribution to our economic prosperity. We will navigate conducive and challenging economic climates with a focus on delivering long-term societal and economic impact.”
This financial year saw the bank’s subsidiary, Scottish Investments Ltd (SIL), secure phase one authorisation from the Financial Conduct Authority (FCA). This set of permissions enables SIL to arrange investment deals, supporting SNIB’s objective to crowd in more private investment.
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