Panmure House - Deputy First Minister's investment speech

Thank you so much for the invitation here to Panmure House and for hosting us in such a historic building.

As we just heard in the introduction, it was of course here that Adam Smith wrote the final edition of the Wealth of Nations in 1789. In that Smith developed the themes from his earlier work, The Theory of Moral Sentiments, which is concerned not only with what today we would call the functioning of the economy and economic growth, but also with its social impact. As Adam Smith said, “When people pursue their own interest, they can also help deliver for wider society.”

That quotation is the theme of my remarks today and probably captures, more than anything else, what we are trying to achieve through our own economic ambitions in Scotland today.  

I would like to reflect on the importance of private investment in our economy and explore why strong collaboration between the public and the private sector matters for our future growth and for future prosperity. It is hardly a news flash, but that also delivers great social good for our country.

Investment, both public and private, is vital if we are to achieve not only our economic ambitions but also our social ambitions, because it means higher wages, it means thriving high streets, it means strong public services and the elimination of child poverty. We cannot do any of the things we want to do - put more money in people's pockets, reach net zero, improve our public services, all of which are highly in demand by the public - without increasing the level of private investment into our economy and making Scotland the most attractive destination that we can for that investment.

In Scotland we have a relatively strong record in attracting foreign direct investment, second only to London and the south east of England according to EY. We have lots of examples of investment and the creation of good, well paid jobs here to point to, but overall private capital investment has lagged behind other developed economies.

A decade or more of austerity has very much constrained our capacity to use public expenditure to stimulate private investment, particularly since in Scotland we have more limited economic levers at our disposal. The fact is that for many years, persistently low levels of investment in Scottish businesses and Scottish projects, due in part to that focus on London and the south east, has held us back and hampered economic growth. And that matters. It matters because if we matched the average level among OECD countries, our GDP could be a percentage point higher by 2035, which equates to nearly £2 billion. If that increased level of investment also increased productivity levels across the Scottish economy, you would get double the impact.

But those numbers, large though they may be, pale by comparison with the scale of the wider opportunity before us. UK investment institutions manage nearly  £11 trillion in global assets. Scottish based firms alone manage some £490 billion. If we can secure more of that capital for Scottish businesses and Scottish projects, the effect is nothing short of transformational.

So today I want to talk about the work that I am undertaking to ensure we are grasping those opportunities and making the most of our economic potential without losing sight of what that means for our people, for our communities and for social value.

Our approach to investment has been guided by the work of the Investor Panel, a group of external experts in investment finance brought together by the then First Minister to provide a private sector perspective on how governments can attract the mobile capital investment needed to support a just transition to net zero.

They reported in October 2023 and it's a brilliant report.They were clear that any country seeking to attract investors needs to be clear in its strategic direction. Secondly, it must build strong and effective relationships. And thirdly, it has to deliver swiftly and confidently. No pressure.

We need to demonstrate, by our words and our actions, that we understand the needs and the priorities of investors. Clearly, those seeking to invest are always looking for the most advantageous use of their assets and government needs to show we understand that investors require a return on investment commensurate with risk.

Fundamentally, I see our job as being to provide the clarity and consistency needed to reduce risk and to tackle what causes uncertainty, namely the blockers and the barriers. We also need to ensure that the public sector works cohesively, effectively and quickly, that we support investors and take action to deal with issues and problems as and when they arise.  

I have communicated to all parts of the public sector that they should see themselves as part and parcel of our economic development work. Stimulating economic growth and attracting private investment isn't only in the domain of our enterprise agencies or the Scottish National Investment Bank.

The Scottish Government's programme of work, announced last September, to attract private capital investment at scale fits into three strategic priority areas - the transition to net zero, housing and public infrastructure.  As soon as you create a list of priorities, lots of people put their hands up to ask why their sector isn't represented, but that is the nature of a priority list.

The First Minister has asked me to take on the role and challenge of being the Scottish Government’s Investment Champion, to manage the work on a cross government level.

Through that work, in direct response to the recommendations of the Investor Panel, we have created a single national pipeline of strategic investment opportunities. We had multiple different pipelines, the difference now is that it's all in one place. Secondly, we are improving our approach to investor relations across the public sector, being far more strategic, being far more intentional about engaging with domestic and inward investors, both those who are already investing and those who have their eye on potential investments. And lastly, and perhaps most interestingly for those that are technically minded, we are looking at how we use financing models and instruments in the most effective way to de-risk projects, partnering public and private sector investment to make something happen.

In creating a national project pipeline, we've gathered all the available on-the-ground intelligence held by our delivery bodies into one place. By collating our knowledge in this way we're able to analyse opportunity areas, identify the common barriers to investment and, importantly, bring that knowledge into our conversations with the investment community.

I want to have real, meaningful and honest discussions with investors about investing in Scotland. I'm too busy to have meetings that aren't characterised by that and the development of a single national project pipeline is an important asset in ensuring that those conversations are the highest value to both the investor and to government.

Later this year we'll launch InvestScotland, a new portal that will showcase investment opportunities and information - essentially the front end of the work that we've done at the back end to create the pipeline - and importantly provide a single point of entry to government. We have a powerful brand identity in Scotland and we need to fully showcase that to global investors. To put it simply, we are making our investment offer as strong as possible, as visible as possible and as clear as possible.

On the second objective, work is underway to improve the public sector approach to engaging with key investors and project sponsors to make it easier to work with government. Delivering that involves looking at the capabilities of the different players in the public sector system, including across central and local government, our enterprise agencies, the Scottish Futures Trust, the Scottish National Investment Bank and Crown Estate Scotland. But I don't want it to end just there and will also bring in other public sector organisations that may not see themselves as being in the business of attracting private investment, but which can often make the difference of a deal being done or not. That will deliver a more agile, systematic and proactive approach from Team Scotland as a whole to investors and developers who want to hear about what Scotland has to offer and wish to discuss specific opportunities.

I think it's well known that our natural strengths and our policy environment make us an attractive destination for investment. To communicate that I am accelerating a targeted programme of proactive engagement with key capital investors and am committed to tackling potential barriers and blockers to investment quickly and decisively. In March this year the First Minister and I hosted a successful Global Offshore Wind Investment Forum here in Edinburgh, which was one of the recommendations of the Investor Panel. We brought together 100 investors, developers and public sector partners to raise general awareness and profile specific investment opportunities in the offshore wind sector in Scotland. The focus was on deal making, on negotiation, to not only create the forum where the supply chain could engage with the developers, but for us to engage with investors, some of whom we haven't engaged with previously. The Forum provided a springboard for future targeted investor engagement to support delivery of our offshore wind ambitions, which you will understand fits very neatly into one of those three priority areas.

The third strand of our programme is to look at how we use financing models and instruments in the most effective way to de-risk and attract new private investment. I was making the comment in another political speech that every year we think this must be the most uncertain year yet, and then the following year proves us wrong. With the current global headwinds, the international uncertainties and the very real challenges businesses are grappling with, uncertainty seems to characterise our day. My job is to understand how I can inject more certainty and less risk into the engagements we have with investors.

For example, we are working with the Scottish National Investment Bank and others to consider how public sector guarantees can be used. We are identifying projects that could be suitable for revenue financing or public private partnerships and we are continuing to progress work towards a Scottish Government Bond, another recommendation of the Investor Panel, not delivered yet but making good progress. We're also working to ensure that the regime for devolved taxes is as supportive as possible for private investment, for example, on Land and Buildings Transaction Tax, where we'll be consulting before the summer recess on reliefs in relation to collective investment vehicles.

In all of those areas, we are continuing to engage widely with the investment community, understanding what they identify as primary blockers and then doing anything within our power to reduce them. .

Offshore wind is, of course, one of our most significant investment opportunities. It's a sector with incredible potential. For decades, long standing policy certainty provided by the Scottish Government and a significantly large pipeline of projects across the offshore wind sector, coupled with investment opportunities in port infrastructure and supply chain companies, has ensured that Scotland is at the forefront of those opportunities.

We are taking real action now to deliver, investing up to £500 million over five years in the infrastructure and manufacturing facilities critical to growth in the offshore wind sector. This is expected to leverage additional private investment of £1.5 billion and it’s an area that I'm particularly keen to see progress. The more we can develop and deliver the domestic supply chain, the more value there will be when developments get over the line and the more likely companies are to use local content.

Activity is gaining pace. You will all know about the investment from Sumitomo, a landmark commitment to invest £350 million in a cable manufacturing facility at Nigg, backed by £24.5 million of public sector investment. Since May last year we've committed more than £68 million investment in port infrastructure for offshore wind, leveraging private investment and driving progress on the enabling infrastructure that's critical to realising Scotland's offshore wind potential.

The Highlands are contributing substantially to Scotland's future through of the scale of investment in the supply chain and, in that spirit, it is my enormous pleasure to announce today that we are continuing to build on that strong foundation with a multi-million pound investment at Kishorn, one of Scotland's most strategically important ports. This is one of the most significant public investments in our port infrastructure for decades. Through Highlands and Islands Enterprise, we will invest up to £24 million at Kishorn Port to enhance capacity and capabilities, with those expanded facilities forecast to attract projects supporting up to 1,500 jobs.

Why does that project excite me so much? Because, going right back to the quotation from Adam Smith about social value and economic growth, those of you that have ever been to Kishorn - and if you haven't I strongly recommend it - will know it is one of the areas of Scotland suffering most from depopulation. Decades ago, it was a hive of activity, creating jobs, attracting people to an area that had perhaps been abandoned and forgotten, and then it lay semi-derelict until an enterprising entrepreneur sought potential in and around the decommissioning work. Seeing it come back to life now is remarkable and for me it is a symbol of why the private investment-led projects backed with public sector funding are not just about GDP figures. They transform communities, they change lives, they eradicate poverty and I think we should be incredibly proud of the way in which the private sector delivers on those objectives. Today’s investment is a clear signal from the Scottish Government and Highlands and Islands Enterprise, giving investors the confidence to invest millions more in this area's wider infrastructure, economy and people.

Housing is critically important for growth and for the well-being of the people who live here. Delivering the right sort of housing in the right places is key to realising the transformational economic opportunities of major projects like the Inverness and Cromarty Firth Green Freeport. It's why the Programme for Government committed us to implementing the recommendations of the Housing Investment Taskforce, which will be published alongside our response imminently. The work that has been done by this group has been immensely valuable, allowing us to draw on the expertise of people and organisations at the front line of investment and delivery across Scotland.

The Taskforce has identified practical actions to support more investment across the affordable, private and investment sectors and support new and existing business models to deliver at scale. We are committed to responding immediately to allow the investment conditions to flourish. We have already taken some of the recommended actions and the influence of the Taskforce is notable in areas like our response in Stage Two of the Housing Bill. We need to seize the momentum generated by the Taskforce's work to show unequivocally how we value investment, particularly in growth areas like Build to Rent.

All of this is in addition to existing support and investment. We’re directly investing in housing through our £768 million budget this year for affordable housing supply and creating a wider policy and regulatory environment to support private investment in housing.

We're conscious of the enormous untapped potential of Scottish pension funds to invest in Scottish companies and Scottish projects, which is why we've committed to a programme of work with the Scottish Local Government Pension Scheme and others over the coming year to look at ways that we can secure more co-investment by both public and private pension funds. So that's a watch this space.

The Scottish National Investment Bank and our enterprise agencies have a critical role to play too. The Bank makes commercial Investments, debt and equity, in businesses and projects in line with the strategic mission set by Scottish ministers. As Scotland's impact investor, it is playing a critical role right across the Scottish economy. To date, its investments of almost £800 million have helped drive in more than £1.4 billion of third party co-investment, while support from our enterprise agencies for businesses and infrastructure also leverages significant private sector investment.

In June last year, the Bank committed £20 million investment into ZeroAvia, a developer and manufacturer of zero emission engines for commercial aviation. That was the Bank’s first investment in hydrogen-based technology and the sustainable aviation sector. That financing was a critical step in the company's overall production plans to bring its clean aviation engine technology to market. And then in February this year, with the National Wealth Fund, co-investing £43.5 million, the Bank committed £10 million investment into sustainable packing technology company Pulpex to support the construction of its first commercial scale manufacturing facility near Glasgow. That planned facility will be capable of manufacturing 50 million bottles per year and create 35 new jobs.

There’s a point here about co-investment and over last year in particular you'll have seen more co-investments between UK Government-run institutions and Scottish Government institutions like the Bank. Investments from the National Wealth Fund and the Bank are critical to the industrialisation of first-of-a-kind technology and future uptake. Haventus’ groundbreaking plan to redevelop Ardersier port is another example. The former oil and gas fabrication yard is being developed into a hub for floating offshore wind projects and has secured £400 million of funding - £300 million private sector investment and a £100 million credit facility from the UK National Wealth Fund and the Scottish National Investment Bank.

In November 2024 as part of the Offshore Wind Investment Programme, the Scottish National Investment Bank announced an investment of £20 million in subsea cable manufacturer XLCC. Earlier this year I had the great privilege of being in the United Arab Emirates with XLCC, engaging with investors. In February, the Bank announced £6.7 million for Subsea Micropiles, alongside £2.5 million co-investment from Marubeniltochu Steel to develop technology that will unlock opportunities in floating offshore wind, again part of the Offshore Wind Investment Programme. Also in February Highlands islands Enterprise announced £5 million for the Scapa Deep Water Quay project.

The point of highlighting these examples is to emphasise that I'm not standing before you just talking about a future pipeline, future opportunities and how we will deliver. I am showing how we are already seeing the evidence of a different approach and a shift in emphasis.

We recognise the need for close and effective collaboration with the UK Government. At the Global Offshore Wind Investment Forum in March I shared a platform with UK Minister Michael Shanks to talk about how both governments would provide maximum certainty and de-risk investment opportunities. In the hours afterwards, when I spoke to a number of people that were present, they couldn't tell me a single thing that I said but they commented how remarkable it was to see a UK minister and a Scottish minister sitting on a stage making the same comments. It's great that we had an impact in terms of sharing that stage. But it is now important we demonstrate that to investors, particularly where a number of those uncertainties are within the gift of one government or the other.

We also need to work closely with our local authorities because some of the most exciting developments are within their gift. The £300 million investment by Barclays in a former industrial site in Glasgow is the largest inward investment project in Scotland and you can't achieve that without working with our local authorities.

So that has been a whistle stop tour of what we have been doing, what we want to do and what my priorities are today. If I, or whoever's in my role, accepts the offer to return in a year's time, the big question that you will need to ask is how we delivered against those ambitions and objectives.

When I came back into government last summer I had one message for my Civil Service colleagues, one message for the Director General, one message for the public bodies, and it was this: Just get stuff done.

We have the Investor Panel recommendations. They are good. We've accepted them. The task is implementing. Failure to implement costs us, not just in economic terms. It costs us in social terms and I do not want to see that happen.

We have a very compelling roadmap now. It's a very simple roadmap, it essentially has three primary objectives across three core sectors. We've got the ambition, we've got the talent, we've got the skills and we've got the resources to secure a prosperous and sustainable future. And you have a government that is determined to create an investor friendly environment to transform our economic prospects, to harness the operation of the market for the benefit of our people.

It is my mission to make Scotland the most attractive destination for investment in the UK. Working in partnership with you and many others, I believe that we can and will succeed.