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Publication - Report

Scottish National Investment Bank: consultation report

Published: 28 Feb 2018
Directorate:
Chief Economist Directorate
Part of:
Economy
ISBN:
9781788515856

Analysis of the Scottish National Investment Bank consultation.

43 page PDF

481.6 kB

43 page PDF

481.6 kB

Contents
Scottish National Investment Bank: consultation report
9. How the Bank should act (Question 6)

43 page PDF

481.6 kB

9. How the Bank should act (Question 6)

This section analyses respondents' views regarding the potential roles that the Bank could carry out. Respondents were asked "Do you think that the Bank should act…?" and given the following options to select:

  • Solely through intermediaries/delivery bodies
  • As a co-investor or co-lender on equal terms with others
  • As a principal investor/lender in its own right
  • Through the provision of finance guarantees
  • Differently in different areas of activity.

Respondents were invited to select a Yes/No against each of the options. There was also an opportunity for respondents to select "Other" and to provide narrative within the commentary box. As respondents were not restricted in the number of selections they made, this could give rise to a perceived contradictory response.

371 respondents (93%) answered one or more elements of Question 6, with 106 respondents (29%) providing additional narrative within the commentary box of which 84 (79%) were considered valid.

The responses are set out in the graph below. Only those that provided a response have been captured in the graph.

Figure 5: Question 6 Responses
Figure 5: Question 6 Responses

Source: Consultation Hub

It should be noted here that a small number of respondents cited some confusion in the answering of this question because in their opinion all of the potential options were possible.

As a principal investor/lender in its own right

This option received the most responses with 91% of those responding to this option answering that the Bank should "act as a principal investor/lender in its own right". A small number of respondents who selected "Yes" for this option stated that acting as a principal investor/lender in its own right would allow the Bank to maintain direct control in all investment decisions which would in turn enable the Bank to meet its predefined objectives. A small number of respondents also noted that acting as principal investor/lender would reduce the risk of project delays and even collapse, as there would be less dependence on additional partners.

Differently in different areas of activity

Generally, there was a strong recognition that the Bank should "act differently in different areas of activity", with 86% of those responding to this option answering "Yes" for this question. Some respondents remarked that the Bank should be flexible and adaptable to the specific needs of the different projects because a structure too restrictive could adversely affect the performance of the Bank. The ability of the Bank to act flexibly should also provide the Bank with an opportunity to balance portfolio risk and returns and result in a more sustainable proposition over the longer term.

A small number of respondents expressed the view that flexibility was important to ensure that differences in Scotland's regional profile would not hamper the success of the Bank, while some other responses stated that flexibility was necessary to ensure that the Bank could intervene in projects of different shapes and sizes, e.g. public infrastructure, SMEs, suitable R&D technology, and existing enterprises among other possible investments. Specifically, it was suggested that the Bank could act through intermediaries for SMEs but act directly on larger scale projects.

Through the provision of finance guarantees

Respondents responded favourably on the opportunity for the Bank to provide guarantees with 81% of those responding to this option selecting "Yes". However, there seemed to be a lack of understanding about how financial guarantees work emerging from the narrative responses. A small number of respondents in favour of guarantees noted that, in particular, export guarantees would be useful, in the industrial sectors specifically. Specific mention was made to lower level export guarantees around the level of £50k. However, it was noted that these should be used sparingly to ensure that enterprises don't expect too much support, which might result in complacency.

As a co-investor or co-lender on equal terms with others

74% of responses to this option recognised the importance of collaboration with the private sector. Firstly, in order to lever in additional investment for the Bank (possibly international) but also to allow for opportunities within the private sector to promote business positively and to share expertise.

However, a small number of respondents recognised that where the opportunity for co-investment exists, appropriate governance must be deployed to ensure that the Bank continues to meet the objectives of the Scottish Government.

Solely through intermediaries/delivery bodies

Respondents expressed a strong view against the Bank acting through intermediaries/delivery bodies with 92% of those responding to this option stating that the Bank should not operate solely through intermediaries/delivery bodies. The reason was that relinquishing control of the Bank's activities by acting through intermediaries was not palatable to respondents.

Other relevant material

A small number of respondents referred to the need for the Bank to operate in an open, transparent and ethical manner to maintain trust between the public and private sectors and ensure sustainable co-investment over a long-term time horizon. Clear and effective reporting would be appreciated for the public to understand the Bank's activities. The governance of the Bank is specifically covered within Question 7 of this Consultation.

A small number also made reference to the need for the Bank to de-clutter rather than further complicate the existing landscape in Scotland. It was noted that several bodies already exist, e.g. SFT, SIB, SGS and it is not advisable to duplicate the efforts of these existing bodies.

Summary

This section analyses respondents' views on how the Bank should carry out its activities. Emerging themes from this question highlighted that the Bank should "act as a principal investor/lender in its own right" but also have the capability to "act differently in different areas of activity". Overwhelmingly, the majority of respondents did not want the Bank to operate solely through intermediaries/delivery bodies.


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