SNIB’s investment record defended as firms fail – Daily Business

Senior civil servants have defended the investment record of the Scottish National Investment Bank as MSPs heard that taxpayer funds invested in failed companies could be written off.

Three officials overseeing the bank’s performance were quizzed over the bank’s performance, pay and governance when they appeared before the public audit committee.

Following the state-owned bank’s recently reported £77m of unrealised losses, MSPs heard there could be another loss of £4.6m on satellite technology firm Krucial which went bust in June.

Daily Business reported earlier this month that Scottish Enterprise also stood to lose an investment in an unidentified company which now appears to be Krucial. When asked at the time, SE declined to confirm the name of the company.

The potential loss, which could total more than £20.2m in loans and other investments, was mentioned in SE’s annual report in addition to £31.5 million written off by the agency in other investments in the 2024/25 financial year.

Public audit committee member Graham Simpson asked the civil servants to comment on SNIB’s potential losses, particularly the £34m invested in laser firm M Squared which collapsed last month.

“We would expect that given the nature of it [the bank] there are going to losses,” Mr Simpson conceded, but he wanted to know if all of the £34m could be lost, at a cost to the taxpayer.

Gregor Irwin, the Scottish government’s director-general economy, who oversees the bank’s performance, replied that M Squared’s insolvency process is ongoing. “We do not know what the implications will be for the bank,” he said.

Mr Simpson again asked if it was possible that all the money would be lost.

“It is essential to look at the bank’s overall performance in the round because there will be gains as well as losses.” said Mr Irwin. “There is a risk of focusing too much on individual investments. In this case [M Squared] the process is still under way.”

“But potentially it could be all £34m?” asked Mr Simpson.

“I don’t know what the outcome of the administration process will be,” said Mr Irwin. “Mr Simpson, potentially there are losses on any investment.”

“Yes, I get that,” said Mr Simpson, “there are risks, there are rewards”, adding that the whole £34m amounted to about 4-5% of all investments by the bank. “Is that an acceptable level?” he asked.

Andy Hogg, deputy director investment and financial services at the Scottish Government, said so far only one loss has been crystallised and that was the investment in Circularity Scotland which was set up to oversee the deposit return scheme that collapsed when the UK government vetoed it.

Mr Hogg confirmed that Krucial had appointed administrators and a provision of £4.6m had been made by SNIB for this also being lost.

He told the committee that the bank had reviewed its investment strategy to require, for instance, a higher level of technology experience and capability.

Mr Simpson welcomed positive developments at the bank, including investments in an aviation technology company, Ardersier Port and housing.

New CEO process ongoing

The committee also heard that a new chief executive for the bank may not be in place until well into next year as the interview process was criticised for taking “a heck of a long time”.

Al Denholm announced his departure in April and that he was giving six months notice, or until a successor is appointed. He will then work with the board in an advisory role until the end of 2026.

The process to replace him is ongoing and a decision may be announced in “in the next couple of months”, the committee heard.

However, given the notice period required by the incoming CEO it could be several months before the new leader is in place, said committee convener Richard Leonard.

He noted that Mr Denholm was in “no rush to go” but the six months’ notice was nearly up and those seeking his successor “might be trying his patience”.

Mr Irwin said: “It is essential we get the right person in this role.”

Richard Rollison, director for international trade and investment at the Scottish Government, added: “We are at the end of the process. A decision is due quite soon.”

Mr Leonard said: “There should be more urgency. Of course we recognise the need to get the right person, but it does seem to be taking a heck of a long time.”

He expressed concern about the number of bodies overseeing governance of the bank, noting that it was overseen by a Business Investment Group, the Scottish Ministerial Advisory Group, the bank’s board and by a figure [the senior independent director] who also oversees it.

“There is the potential danger that at a strategic and even an operational level there are lots of cooks who might spoil the broth,” he said.

Mr Irwin replied: “Yes. I think the question here is balance. It is also important we comply with legislation. I judge it a good governance system.

“But the key is ensuring it works well is to respect the roles and responsibilities of different parties within that system. I do not have any concerns about any elements of that system and I think we have the balance right.”

Committee deputy convener Jamie Greene asked the civil servants about the salaries and bonuses paid to SNIB staff when it continued to make losses.

Mr Irwin said the bank was subject to the government’s pay policy which aligns with other UK development banks.

The long term investment plan on which bonuses are calculated was “carefully constructed”, he said. In terms of losses, these would be offset by gains in other years.