Business Case – Establishment of a New Sustainable Aquaculture Innovation Function (SAIC)

3. The Economic Case

3.1 Critical Success Factors

Critical Success Factors are identified in order of priority as:

1. changes to SAIC do not result in any hiatus in key innovation support for the aquaculture sector in Scotland.

2. applied research and innovation projects of direct relevance to the Scottish aquaculture sector (particularly supporting finfish health and welfare or adaptation and mitigation to climate change) are sustained over the long term

3. SAIC’s effectiveness in instigating, facilitating and nurturing genuine collaboration across industry, academic and government partners is maintained

4. the leveraging of significant funding from industry, UKG and other third-party partners is sustained at or above current levels.

5. stable governance and financial arrangements are agreed to support the above

6. a ‘Team Scotland’ approach, to specific high profile/international aquaculture events is sustained with Scottish producers and supply chain businesses represented.

3.2 Main business options

A number of potential options were identified through a period of desk research and wide sector engagement including considering international arrangements. Consideration was given to sustaining SAIC as currently established or seeking to transfer to a new host body and replicating current arrangements. While SAIC (legacy project under UoS) has delivered consistently, the hosting of SAIC by UoS, was identified in stakeholder feedback to have presented challenges and a consensus emerged that future hosting by an academic body was not desirable.

Initial options identified before stakeholder engagement:

• Do nothing – No active coordination of aquaculture innovation in Scotland
• Constitute a new independent legal entity – Establishing an innovation centre as a standalone entity
• SAIC functions are assumed by UoS – Continuing current arrangements with minimal change
• New host academic body – Replicating current arrangements with a new host
• CES hosts SAIC as part of ongoing operations
• Highland & Islands Enterprise (HIE) hosts SAIC as part of ongoing operations
• Replicate aspects of innovation arrangements from other Scottish industries
• Replicate international comparators
• A new finfish industry led innovation body

Following stakeholder engagement and feedback these options were refined to seven and a summary of the analysis in relation to each option is provided below:

A. Do nothing

Taking no action to sustain the operation of SAIC will lead to the closure of the organisation with a consequent reduction in support to the sector on critical issues relating to productivity and particularly those relating to the health and welfare of finfish or the climate crisis.

Expertise developed over ten years would be lost and collaboration across Scotland’s academic and industrial base would be very significantly reduced. The Vision for Sustainable Aquaculture published in July 2023 recognised innovation as a key enabler and the realisation of the Vision would be impeded with criticism likely from a wide range of stakeholders.

While academic institutions or other actors may seek to cherry pick some of SAIC’s services or projects where they could bring specific value, no certainty exists in this regard and a significant negative impact on innovation output would be inevitable.

Risks that the Vision for Sustainable Aquaculture or outputs of CES’s Corporate Plan will not be realised will be exacerbated.

B. Constitute a new independent legal entity

The establishment of a new independent organisation with public sector funding and no external host body is strongly supported by stakeholder feedback.

It presents an opportunity for genuinely independent operation with wide sector input to governance and operation, as well as agility of approach. Funders’ required outcomes would be secured through grant agreements while control of, and decision making for, the company would lie with the Directors and Members of the company drawn from the sector. Stakeholders from across the wider sector, academia and innovators would have the opportunity to input to strategic direction and operational priorities. This will create the opportunity not only to ensure that critical public outcomes are achieved, but to create a non-competitive space in which the aquaculture sectors can collaborate and potentially fund further work beyond that which is publicly funded. This creates additional value for the public investment.

Operated on a not-for-profit basis the company would have the ability to seek funding from across the Scottish and UK public sector while requiring match funding from private sector project partners. The entity would be constituted as a Company Limited by Guarantee operating independently and financed from a basket of funders as it is able to make compelling cases for investment.

An independent company would be able to focus on specific areas of innovation support, or grow innovation through a wider programme effort, reacting flexibly to resource opportunities and evolving policy and operational needs.

C. SAIC functions are assumed by UoS

As part of the Stirling and Clackmannanshire City Deal, the University of Stirling has developed the National Aquaculture Technology and Innovation Hub (NATIH) within the structure of the Institute of Aquaculture. NATIH is now operational but further work is ongoing to establish research priorities and a revenue generation model, much of the activity is expected to be focussed on warm water production beyond Scotland e.g. tilapia. Stirling’s Institute of Aquaculture has been a key partner and recipient of project funding from SAIC through the last ten years of its operation, but the University faces a range of budget challenges with student numbers down and a consequent reduction in academic headcount.

Stakeholder feedback has identified a concern that the hosting of SAIC by UoS may have led to a conflict of interest in the management of SAIC and a de-prioritisation of opportunity for other stakeholders. While the scale and nature of such a conflict of interest is not well documented, this concern was regularly expressed by a range of stakeholders and often expressed strongly. The perception of a conflict of interest is highly likely to have impacted the willingness of some stakeholders to engage as fully with SAIC as they might otherwise have done. Moving from a hosting arrangement with UoS to an alternative structure is expected to generate wider stakeholder support for the sector and lead to enhanced impact through allaying any concerns that such a conflict of interest may exist.

While an opportunity for UoS to assume the activity and operations of SAIC may theoretically exist, either through NATIH or the operations of the Institute of Aquaculture, the current resource position of the University indicates that this would be extremely challenging to deliver. It is not clear what funding channels would deliver an opportunity for SAIC’s activities to be carried forward at a time when UoS already faces a challenge to fund the operations of NATIH.

SFC funding has previously required that project leadership sit with an academic institution and stakeholder feedback has indicated that, while innovative SMEs have been able to participate in project partnerships, they have been prevented from taking on project leadership roles with a variety of negative impacts identified by stakeholders. Assimilation by UoS of SAIC’s operation is unlikely to enable greater leadership by innovators outside the University sector and is therefore likely to inhibit such businesses making the fullest contribution possible. The assumption of SAIC’s responsibilities by UoS was not supported by stakeholders and UoS has not demonstrated any appetite to take on such a role.

D. New host academic body

The creation of new arrangements hosted by a different academic or industry partner risks replicating some of the structural challenges of SAIC being hosted by UoS. Hosting by a single entity risks a conflict of interest with that host’s own priorities and is unlikely to fully capitalise on the potential opportunities for the wider supply chain that could arise from greater input from SMEs and non-academic innovators.

Similar arrangement to those from phase 1 and 2 of SAIC’s operation could be made with a new institution filling the role currently held by UoS.

UoS currently holds legal responsibility for all aspects of SAIC’s operation, is the financially accountable body, is the contracting partner for all agreements SAIC enters into and acts as the employer for all SAIC staff. A formal agreement with a new institution would see that entity take on responsibility for all of the above including any liabilities relating to the employment of staff or the completion of projects already initiated but ending after 2024.

Such an arrangement would bring an administrative burden and a range of risks to the new host and it is difficult to see, at a time of tightly constrained resources across the University sector, what benefit the host might derive in the absence of long-term funding.

E. CES hosts SAIC as part of ongoing operations

Crown Estate Scotland’s (CES) draft Corporate Plan (2026-31) outlines a mission-driven approach built around three pillars: planet, people and productivity. Innovation in aquaculture is central to SAIC’s overarching aims and to CES’s strategic goals.

Following the root and branch review of aquaculture rents conducted by CES in 2022 an opportunity exists for CES to fund innovation from aquaculture rents as they are uplifted in 2026.

An aquaculture innovation programme supported and hosted by CES could provide an opportunity for CES to protect and develop aquaculture rental income to the estate through supporting the sustainability and development of a sector already delivering significant rental income. Hosting would enable synergies around organisational overheads but risks potential conflict of interest with CES’s own priorities or governance and risk management processes.

Feedback from CES’s senior management indicates that bringing SAIC’s activities within CES is not favoured, being dissimilar to other parts of the wider organisation and potentially outside CES’s legal powers.

SAIC’s operations align well with the Strategic Pillar’s identified in the CES Corporate Plan which are enhancing nature, supporting sustainable communities and progressing the Just Transition.

The CES Corporate Plan and SAIC’s strategic objectives converge on the key themes of sustainability, innovation, and collaboration.

F. Highland & Islands Enterprise (HIE) hosts SAIC as part of ongoing operations

An aquaculture innovation programme supported and hosted by HIE could provide an opportunity for HIE to support the sustainability and development of a sector with a significant footprint across the Highlands and Islands region. Hosting would enable synergies around organisational overheads and would afford an opportunity for strong alignment with HIE’s corporate priorities and wider work programme. Risks of a potential conflict of interest with HIE’s own priorities or governance and risk management processes would require to be managed very carefully.

While HIE possesses significant expertise in the management of grant funding and is active in supporting both the aquaculture sector and wider innovation across the region it is not clear how the additional resources needed to support the hosting of an additional team within HIE’s structure would be identified. The corporate appetite of HIE to assume responsibility for new activity without clear long-term funding and exit arrangement is considered to be very low given recent corporate experience of subsidiary businesses.

G. A new finfish industry led innovation body

A new body led by the finfish sector offers an opportunity to deliver quickly against the core priorities of the finfish producers and supply chain which are likely to be in the fish health and welfare space. Projects in this space would be expected to focus on the biological challenges faced by producers and are likely to generate the greatest increases in production output and economic benefit.

Leadership by the sector would likely lead to a prioritisation of the needs of salmon producers and their associated supply chain, risking a failure to meet the needs of the wider sector, in particular shellfish and seaweed production. The prioritisation of projects delivering against SG or wider public sector ambitions is assumed to be low and salmon sector leadership could risk the realisation of the full breadth of the Vision for Sustainable Aquaculture.

Deployment of public sector funding to an industry led body with a clear focus on the needs of the salmon subsector would be politically difficult.

Options considered

1. Do nothing Benefits:

• No additional public expenditure
• No organisational or governance complexity

Risks:

• Continued fragmentation of innovation support
• Limited coordination between industry and academia
• Reduced ability to attract private investment
• Missed opportunities to improve productivity, sustainability and competitiveness
• Limited ability to respond to strategic priorities and emerging challenges

2. Constitute a new independent legal entity (preferred option) Benefits:

• Allows public sector and CES contribution
• SG + CES governance input
• Allows UK or private sector funding
• Alignment with SG policy direction

Risks:

• Support required in the initial set-up
• SG/CES governance arrangements may be complex
• CES appetite yet to be fully understood

3. SAIC functions are assumed by the University of Stirling (UoS) Benefits:

• Institute of Aquaculture has strong links with SAIC

Risks:

• Perpetuates stakeholder concern regarding existing delivery
• Progress would depend on UoS internal priorities
• UoS may have limited ability to resource SAIC, even with grant support
• Limited appetite within UoS

4. New host academic body Benefits:

• Organisational synergies and efficiencies from using the host’s corporate functions
• Could allow SG to be more flexible with available resources and policy priorities

Risks:

• Agreeing a new host would be complicated, costly and time-consuming
• Progress would depend on the new host’s priorities
• Scottish universities are under significant resource pressure
• Limited appetite among suitable institutions

5. CES hosts SAIC as part of ongoing operations Benefits:

• Longer-term access to financial and hosting resources
• Alignment with SG direction and easier SG input
• May allow UK or private funding

Risks:

• Could complicate CES relationships and operations
• Limited appetite for direct management
• Progress would be subject to CES priorities

6. HIE hosts SAIC as part of ongoing operations Benefits:

• Longer-term access to financial and hosting resources
• Alignment with SG direction and easier SG input
• May allow UK or private funding

Risks:

• Could complicate HIE operations
• Very limited appetite based on recent experience with subsidiary bodies

7. A new finfish industry‑led innovation body Benefits:

• No SG resource or financial requirement to stimulate progress
• Allows SG more flexibility with resources and policy priorities

Risks:

• Salmon‑specific focus likely to prioritise short‑term goals
• Limited or no attention to non‑salmon concerns
• Does not support wider SG policy aims (environmental impacts, climate adaptation)
• Politically challenging to channel public funding to a salmon‑sector body

Further detail on how SAIC’s activities align with Crown Estate Scotland’s corporate pillars (Planet, People, Productivity) is provided in Annex B.

3.3 Preferred way forward

Option B is identified as the preferred way forward

Following assessment, option B was recommended to the Cabinet Secretary for Rural Affairs, Land Reform and Islands Mairi Gougeon who agreed it should be taken forward as the preferred course of action subject to the views of the sector. Sector feedback was highly supportive of this option, and it was the preferred option for industry who saw it as pragmatic response to a strategic need in a complex funding situation.