Scottish National Investment Bank: review of performance 2026

Growing the Bank – third party capital

98. One strategic issue which has been raised in the course of my review is whether the £2 billion capitalisation to which the Scottish Government committed by 2030 would be sufficient for the longer term.

99. When the Bank was first under discussion, that figure was considered to be broadly comparable with the size of other development banks in relation to the size of the Scottish economy: but I have heard arguments that in fact this leaves the Bank with relatively limited “firepower”, particularly if it wishes to act as a catalytic cornerstone investor for large, strategically important investment positions without using too large a proportion of its overall capital.

100. It has also been put to me that if the conditions are right, the Scottish economy could sustain a significantly higher overall level of investment than is presently the case.

101. Against that background, the Bank’s leadership has the long-run ambition to create a significantly larger balance sheet than the £2 billion capitalisation from the Scottish Government.

102. The only way the Bank could achieve such growth would be to attract significant volumes of additional capital from the private sector, over and above crowding-in on individual Bank investments. The Bank has the ambition to do this by creating new funds in which private sector investors could participate.

103. This would require further authorisations from the Financial Conduct Authority; and it would also need the Bank to be able to satisfy investors as well as regulators that it has full independence from Ministers; has a stable long-term future; that it has strong credibility and expertise as an organisation; and that it has access to a sufficient number and range of investible propositions that are not visible or available elsewhere.

104. The Bank’s performance over its first five years has gone some way towards establishing a platform on these points. Depending on how it evolves, the Bank’s expanded activity in the area of housing may further strengthen its position. And the way the Bank develops its current proposals for a university spinout fund will be an important test, both of 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.

105. The need for the Scottish Government to take action soon, in collaboration with the UK Government, to set the Bank on course to become a permanent feature of the Scottish financial landscape is clear, and is crucial to creating the conditions for the Bank’s future success. But in the near term, and as a matter of strategic priority, the Scottish Government also needs to decide and give a clear steer on where, how and how far it wants the Bank to pursue the third party capital route.