Scotland: A New National Investment Bank
The Background
On the 27th of February 2020, the Scottish National Investment Bank Bill received royal assent. This bill seeks to officially establish Scotland’s first national investment bank by the second half of 2020 to reinforce the Scottish economy amidst Brexit uncertainty. The Scottish government has outlined a goal to invest £2 billion into the bank over the next 10 years to finance its functionality.
Key Aims
As UK-headquartered private investors anxiously navigate the Brexit transition period, fledgling businesses seeking investment to establish themselves are met with trepidation from cautious investors. This caution-bound approach has arguably stifled the introduction of home-grown competition in the Scottish economy, where no publicly-owned investment bank currently exists to inject much-needed capital into innovative projects. The bill entertains a less apprehensive approach to investment, stating that it will ‘catalyse private investment to achieve a step for growth in the Scottish economy’.
While the looming Brexit transition period deadline (projected December 31st 2020) is an essential factor, Morton Fraser solicitor Kirsty McBirnie suggests other causal factors that determine caution from private Scottish investors. Citing a rather traditional barrier to investment, she states the ‘lack of appetite from the private sector’ stems from ‘higher risk innovative activities or new technologies particularly for businesses without a proven track record of success’. Although the establishment of a Scottish national investment bank arguably won’t reduce the material risk of financing new ventures, its creation entails an alternative investment mechanism to private investors seeking short-term returns on capital invested.
Scotland’s willingness to establish a more green economy seeps into the Bill’s primary objectives; namely, ‘accelerating the move to net-zero emissions’. By investing into more risky business plans that minimise reliance on dependable fossil fuels via leveraging renewable energy, the Scottish Investment Bank can fulfil what First Minister Nicola Sturgeon calls a ‘moral responsibility to tackle climate change’. In addition to this, investing in such business plans marks a shift to more long-term investment strategies that rely on gradual growth through experimentation with renewable energy sources.
A National Approach
The Scottish Parliament’s determination to establish a national investment bank arguably reflects a more interventionist approach to market economics than previously adopted. In light of Brexit uncertainty, this approach possibly reflects a willingness to establish a financing system that is less contingent on the discretion of private investors.
by Brighton Dube