Achi news desk-
A stalwart of the investment industry for almost 40 years, Mr Denholm was drafted in a year ago after the controversy that engulfed the bank following the sudden departure of Eilidh Mactaggart, its first chief executive, in February 2022. Ms Mactaggart broke her silence several weeks after quitting. to state that she had left for personal reasons, but that was not before a whirlwind of speculation about her departure arose, after the bank failed to explain why she had left.
Mr Denholm had not been in his post for a while when the bank went into a new storm. It emerged in October that the collapse of the Scottish Government’s plans to introduce a deposit return scheme (DRS) would mean that the SNIB would lose around £8m of its £9m investment in Circularity Scotland, the company which was established to administer the scheme.
Circularity Scotland, which had been funded by industry groups, went into administration last June, after the DRS operation was kicked into the long grass by Scottish ministers. The UK Government had refused to provide an exemption to the Internal Market Act which would have allowed the scheme to go ahead.
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Addressing MSPs in October, Mr Denholm said the risk of investing in Circularity Scotland had been “properly discussed” at the time of the investment. And in the interview this week in The Herald, the bank declared that its investment process was “robust”, as Mr Denholm praised the talent of his team and the quality of his investments.
A new impact report due to be published soon will show that 1,300 jobs are directly supported by its investments, with a further 540 supported by “indirect and induced effects”. The SNIB has now used around £640m of capital in 35 investments, and has increased its team to 81 people.
“It’s well established now and making, I think, very good investments as well,” Mr Denholm told The Herald. “We’re really hitting our speed. We’re investing in some really interesting businesses that I think showcase the best of Scottish ingenuity.”
The bank was launched by former First Minister Nicola Sturgeon in November 2020 with a war chest of patient capital worth £2 billion to be invested over 10 years. It was set up to tackle some of the biggest challenges facing Scotland, with a remit to invest in three key “missions”: the drive to net zero, tackling inequality “place-based”, and harnessing innovation to help people thrive.
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Those missions remain the cornerstones of the development bank’s activities, and its ever-growing portfolio seems to reflect that purpose. The bank’s latest deal, revealed this week, saw it further invest in a fund with a mandate to provide 1,500 energy-efficient homes close to Scotland’s major city centres. The £20m investment will help the New Avenue Living Fund to provide a further 100 homes, in addition to the 649 it has already built and the 422 currently being developed.
This deal, which increased to £60m the investment that the SNIB has now made in the New Avenue Living Fund, could certainly be considered timely, given the acute shortage of affordable housing in many parts of r Scotland.
There is also a clear rationale behind other recent investments made by the bank, including a £10.5m follow-on funding for Orbex announced last week.
The Scottish rocket company, which raised a total of £16.5m in this latest investment round, will use the funding to complete work on its Prime micro-launch vehicle and spaceport being built in Sutherland. Orbex is one of only two space rocket manufacturers in the UK, the other being Skyrora in Cumbernauld. The Prime rockets will carry satellites into space on behalf of technology and communications customers. The space industry has been identified as a clear area of opportunity for the Scottish economy.
No doubt the SNIB would be ready to explain the business case for each of the 35 investments it has made so far.
But, for now at least, there is no doubt that the bank still has many critics to win over.
There are those who question the large amount that the Scottish Government is committing to over a 10 year horizon, especially when there is so much pressure on public finances.
Skeptics have regularly asked why a national development bank is needed and how it would provide something new to the funding mix that already supports start-ups in Scotland, whether from banks or Scottish Enterprise, the national economic development agency and publicly funded.
The bank’s purpose was also questioned in a critical report commissioned by the think tank Reform Scotland in May 2022. In the report Ross Brown, professor of entrepreneurship and small business finance at the University of St Andrews, said the bank’s remit was “vague”. and its “limited” impact.
Certainly the convictions of those who are skeptical of the bank will not have been challenged by the arguments that have been a source of concern for him in the period since then. Her reputation was undoubtedly damaged by the way top brass were perceived to have handled Ms Mactaggart’s departure, which appeared to be particularly underwhelming from a PR perspective. Furthermore, the £8m the bank lost on the investment in Circularity Scotland will not have helped its credibility as a careful custodian of public money at a time when every pound is a prisoner.
However, although those periods have been far from ideal, the work of SNIB, which is a specialist in patient capital, will surely be judged in the long term, when the impact of the investments it makes make them obvious now. It also seems fair to give the bank’s relatively new chief executive a chance to make his mark.
