Scottish National Investment Bank makes ‘painful’ £138m net loss

Established in November 2020 by the Scottish government, the SNIB was launched with an ambitious mission: to address critical market gaps and stimulate investment in areas deemed vital for Scotland’s future prosperity. Its strategic missions are explicitly focused on supporting the transition to net-zero, fostering innovation, and promoting inclusive growth. With an initial capital commitment of £2 billion over 10 years, the bank was designed to be a patient capital investor, taking on risks that traditional commercial lenders might shy away from, thereby unlocking private investment and accelerating economic transformation. This model inherently accepts a higher risk profile in exchange for potentially greater societal and economic returns.

The recently published annual report for the 2025-26 period revealed the extent of the financial challenges faced. The £138 million net loss comprises two main components: £65 million in realised losses stemming from the outright collapse of three of its early portfolio companies, and a further £85 million in unrealised losses due to the significant devaluation or administration of two other key investments.

Among the most prominent failures was M Squared Lasers, a Glasgow-based photonics company and notably the SNIB’s very first investment. The collapse of M Squared, once hailed as a high-potential innovator in advanced laser technology, served as a stark reminder of the volatile nature of deep-tech investments. Another significant realised loss came from Trojan Energy, an Aberdeen-based electric vehicle charging firm that aimed to revolutionise on-street charging solutions. Despite its innovative approach, the company faced significant operational and market challenges that ultimately led to its demise. The third realised loss was attributed to Krucial, a satellite and digital connectivity company that struggled to secure further funding in a competitive and capital-intensive sector.

Beyond these outright failures, the bank also recorded substantial unrealised losses. Orbex, a Sutherland-based rocket manufacturer poised to launch small satellites from the UK’s first vertical launch spaceport, entered administration, impacting the bank’s significant investment in the nascent Scottish space industry. Similarly, Pneumowave, an Edinburgh-based medical technology firm developing a respiratory monitoring device, also faced administration, contributing to the unrealised losses. These instances highlight the severe impact of a challenging economic climate on even promising, high-growth ventures.

Despite these significant losses, the SNIB’s report also presented a more nuanced financial picture. The bank generated an income of £32 million during the year, comfortably exceeding its operating costs of £20 million. This demonstrates a degree of operational efficiency and revenue-generating capacity, even as its investment portfolio experienced turbulence. Furthermore, the bank remained highly active in its core mission, investing a record £374 million in Scottish ventures during the same period. Since its inception, the SNIB has deployed over £1.2 billion across 53 different companies and projects, successfully leveraging an additional £1.9 billion in third-party private and public investment. This catalytic effect, drawing in external capital, remains a critical measure of its success in stimulating the broader Scottish economy.

Willie Watt, the Chairman of the Scottish National Investment Bank since its launch, acknowledged the difficult figures. "The realised and unrealised losses we have seen in this financial year reflect that and are not where we want to be," Watt stated. He emphasised that while the figures were "painful" for the bank, the impact was even more profound for the businesses that failed and, crucially, for their employees. Watt attributed part of the difficulty to a "tough economic environment" characterised by "tighter financial conditions, cautious sentiment and more challenging fundraising." This global economic backdrop, marked by rising interest rates, inflationary pressures, and a general tightening of venture capital markets, has created an exceptionally difficult landscape for startups and scale-ups, particularly those reliant on significant upfront capital.

In response to these challenges, Watt affirmed the bank’s commitment to learning and adaptation. "We have learned a lot over the past five years and continue to improve and tighten our investment processes along with stricter criteria for potential investments as set out in our investment strategy," he explained. This indicates a proactive approach to risk management and portfolio selection, aiming to strike a better balance between its developmental mandate and financial prudence.

Chief Executive David Ritchie echoed Watt’s sentiments, describing the losses as "regrettable and disappointing." However, Ritchie also conveyed a firm resolve to demonstrate the bank’s value. He stated his determination to show that a "commercially disciplined development bank can deliver for Scotland," underscoring the delicate balance between supporting innovative but risky ventures and ensuring long-term financial sustainability. The bank’s leadership is keen to ensure that the initial growing pains do not overshadow its overarching strategic purpose.

Adding an independent perspective, a report by Sir John Elvidge, a former chief civil servant to the Scottish government, had previously anticipated that the bank would incur losses of approximately £110 million by the end of the 2025-26 financial year. While the actual loss exceeded this projection, Elvidge’s report notably concluded that the scale of the failed investments was "not necessarily higher than should be expected for a newly launched body" operating with a high-risk, patient capital mandate. This independent assessment provides important context, suggesting that some level of investment failure is an inherent part of a development bank’s operational model, especially one supporting nascent industries and innovative technologies.

The bank’s annual report and its substantial losses naturally drew reactions from Scotland’s political landscape. First Minister John Swinney, responding to the findings, emphasised the necessity for the bank to take calculated risks to achieve its broader objectives. He articulated that this principle was "essential to constructing an economy that is fit for the 21st Century," signaling continued government support for the SNIB’s strategic direction, despite the financial hit.

However, opposition parties voiced concerns regarding the use of public funds. Daniel Johnson, Scottish Labour’s economy spokesperson, called for a thorough examination of the losses and urged the bank’s leadership to "continue to work to identify investment opportunities that will deliver for our economy and our communities." This highlights the demand for accountability and a clear demonstration of value for money.

Kim Schmulian, finance spokesperson for Reform UK Scotland, was more critical, characterising the situation as "yet another example of SNP ministers gambling with taxpayers’ money while those responsible try to dress up failure as a ‘challenging environment’." This perspective underscores a common political critique when public sector investments incur losses.

Similarly, Scottish Conservative finance spokesman Craig Hoy warned that the bank "must not become another SNP vanity project where taxpayers are left to foot the bill for failure while ministers dodge responsibility." These comments reflect a broader concern about government-backed initiatives and the potential for perceived mismanagement of public resources.

Looking ahead, the Scottish National Investment Bank faces the dual challenge of refining its investment strategy to mitigate future losses while continuing to fulfil its vital role in stimulating the Scottish economy. Its long-term success will not solely be measured by financial returns but also by its contribution to job creation, fostering innovation ecosystems, accelerating the net-zero transition, and promoting inclusive economic growth across all regions of Scotland. The "painful" lessons learned from its early investments are expected to shape a more robust and strategically focused approach, as the bank navigates the complexities of developmental finance in an ever-evolving global economy.