Taxpayer-backed Scottish National Investment Bank sees losses top £138 million
“There have been a number of things over the past year that have been encouraging” – David Ritchie, CEO
The head of the taxpayer-backed Scottish National Investment Bank has admitted the outlook is “challenging” after its annual losses spiralled to £138 million.
The six-year-old bank’s latest annual report and accounts - covering the year to March 31 - reveal that bottom-line losses amounted to the sum, reflecting losses from the failure of three early investments and other write-downs.
The hefty deficit - which compares with a paper loss of £77m a year earlier - also reflects anticipated losses relating to the failure of two further portfolio companies whose administration processes had not completed by the end of March.
SNIB was established in November 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.
The bank said its latest financial results reflected a “challenging operating environment for early-stage businesses”. During the period under review, it committed £374m to Scottish businesses and projects - the most in a single year since it was established - with a further £445m from other investors committed alongside its investments.
When excluding investment losses, the bank actually generated an operating profit, of £12m.
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Chairman Willie Watt said: “Investment losses will always be present in a development bank portfolio, with a mandate to take on higher risk. However, the scale of the realised losses taken together with the provisions made against the portfolio is challenging.
“Many of these losses relate to the first three years of the bank’s existence and predate tighter investment conditions that were introduced in 2023.”
He added: “Businesses are facing a challenging funding and operating landscape, demonstrating that Scotland needs investors, like the bank, with a long-term view, and this is reflected in the strength of our pipeline.”
New chief executive David Ritchie, who was appointed earlier this year, said: “There have been a number of things over the past year that have been encouraging. We had a record year of commitments. The position we have got to with our income and operating costs is really positive.
“We are set up to be a long-term patient investor. There are a number of assets within our portfolio which are high performing and not only delivering impact in Scotland but are trending towards positive exits.”
To date, SNIB has committed £1.2 billion and crowded in a further £1.9bn of capital into Scottish businesses and projects. The bank said its investments have “positively impacted” more than 325,000 people since launch, while supporting some 3,300 jobs through its portfolio.
Last week, former permanent secretary to the Scottish government, Sir John Elvidge, said the bank needed a relaxation of its financial constraints, including an ability to raise capital in its own right. He was commissioned to examine SNIB’s performance over its first five years and assess its progress against its statutory objectives and missions.
Mr Ritchie added: “On third party capital, a stated priority for me and for the board is that we want to diversify our capital sources. We are engaging with a number of institutional investors and are speaking to a number of local government pension funds as well.
“What we do see is ongoing demand for the bank’s capital and a pipeline of businesses and projects that will require investment.”
The bank recently outlined a revised strategy and business plan.
Opposition politicians at Holyrood said the losses should be cause for concern.
Craig Hoy MSP, the Scottish Conservatives’ finance spokesman, said: “These eye-watering losses raise serious questions about how the SNP’s flagship Scottish National Investment Bank is operating.
“Taxpayers are repeatedly having to foot the bill for failed investments, while staff continue to take home huge salaries.
“The Scottish National Investment Bank is supposed to be a crucial vehicle for driving economic growth in Scotland but will be impossible to achieve if these losses continue to escalate.
“SNP ministers must ensure those at the top of the Scottish National Investment Bank are carrying out due diligence before making their investments to ensure that taxpayers get value for money, instead of having to pick up a hefty tab for when companies go under.”
Daniel Johnson MSP, Scottish Labour’s economy spokesman, added: “The Scottish National Investment Bank is expected to take some risks but it is important that it delivers results.
“These losses must be examined and the bank’s leadership must continue to work to identify investment opportunities that will deliver for our economy and our communities.”
A spokesman for the Scottish government said: “Since launch five years ago, the bank has invested more than £1.2 billion, attracted a further £1.9bn of private investment, and supported more than 3,300 jobs across Scotland.
“These results reflect its role as Scotland’s mission-led development bank, and the nature of investing to deliver long-term economic, social and environmental benefits.
“The bank’s recent independent five-year review and Audit Scotland’s assessment both recognised the progress made in moving from establishment into delivery and the strong foundations that have been built for the future.
“We are considering the recommendations as part of work with the bank on its long-term funding. Any future approach would need to align with the bank’s missions and protect its operational independence.”
David Green MSP, the Scottish Lib Dems’ public service reform spokesman, said: “The Scottish Government has generated big expectations about what this bank can and will achieve.
“These results will make uncomfortable reading for ministers.
“After receiving large amounts of taxpayers’ cash, we need to see the Scottish National Investment Bank succeed and drive growth. Lessons need to be learnt and fast.”
Kim Schmulian MSP, Reform UK’s finance spokesperson, added: "A staggering £138m loss is hardly ‘encouraging’.
“This is yet another example of SNP ministers gambling with taxpayers’ money while those responsible try to dress up failure as a ‘challenging environment’.
“In the real world, executives would face serious consequences for losses on this scale. Scottish taxpayers deserve the same accountability from the people entrusted with their money.
“The finance committee must urgently scrutinise how £138m was lost and whether the Scottish Government’s investment model is fundamentally broken.
“There must be stronger due diligence, tougher risk assessment and far greater oversight of investments.
“Taxpayers should not be left carrying the cost of poor decisions and failed SNP government policy."
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