A SCOTTISH National Investment Bank (SNIB), for which Finance Secretary Derek Mackay announced funding of £340 million in November, will take a step closer to reality later when plans are unveiled to establish it.
Benny Higgins, Tesco Bank’s outgoing CEO, will put forward his recommendations for the operating model and financing of the publicly-owned venture at an event in Edinburgh, after being asked to develop the plan by First Minister Nicola Sturgeon last year.
It is likely the SNIB will be based in Edinburgh, as one of Europe’s main financial centres, and is expected to create more than 100 jobs.
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The initial funding announced by Mackay was for two years and Higgins – who is also chairman of Australian fintech company Kyckr – will be looking for significantly more than that to bolster Scottish businesses.
He is also likely to recommend that money is allocated to the country’s tech companies – an increasingly valuable part of Scotland’s economy.
Higgins has taken soundings from across the public and private sectors, as well as considering the experiences of Germany and Ireland in setting up their own models. He will also suggest measures to help to build a greener economy and to create the infrastructure necessary to allow electric cars to become more commonplace.
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Sources close to Higgins have said he has found “overwhelming support” for a SNIB to complement investment from the private sector.
One said: “On top of the initial £340m that has already been committed we expect capitalisation to rise to £2 billion in the first ten years of its establishment.
“The recommendation from Benny is that if you want to do this properly you have to invest in it properly. Businesses needing between £2bn and £10bn find it very difficult to find new investors.
“That is particularly true in the tech economy where businesses take a little longer than two or three years to realise their potential. To grow a tech product might take up five, six or seven years.”
A report in October suggested that the SNIB could be responsible for the creation of more than 50,000 jobs and have the potential to offer billions of pounds of savings to the public purse.
The blueprint came from the New Economics Foundation (NEF) and Common Weal think tanks, and set out what the SNIB could look like, along with the legal, political and economic approaches needed for the Scottish Government to establish it.
It won backing from economists and trade unionists amid claims it could be a major driver for jobs through long-term, low-interest investment loans.
Laurie MacFarlane, the NEF researcher who wrote the report, said: “Meeting the challenges of the 21st century requires bold and ambitious plans for financing and directing investment in a smart, inclusive and sustainable direction.
“However, with public budgets in decline, economic uncertainty increasing, and a banking sector still focused on short-term shareholder returns, the need for fresh thinking around investment is greater than ever.
“In our paper we have set out how establishing a Scottish National Investment Bank would be the first step towards creating a new ecosystem of banking institutions capable of transforming Scotland’s economy and reasserting the country’s once proud banking tradition.”
Dave Watson, from Unison Scotland, said the October report was a welcome contribution to the debate on public borrowing: “Our economy needs a significant boost in public investment and current models of non-government borrowing like public-private partnerships are ruinously expensive.
“National investment banks have a proven track record in leveraging the resources we need to increase sustainable investment,” he added.
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