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Publication - Publication

Scottish National Investment Bank: implementation plan

Published: 28 Feb 2018
Directorate:
Chief Economist Directorate
Part of:
Economy, Money and tax
ISBN:
9781788516600

This implementation plan provides recommendations on the establishment of a Scottish 'National Investment Bank'.

Contents
Scottish National Investment Bank: implementation plan
Appendice C Existing sources of finance

Appendice C Existing sources of finance

Scottish Government

SME capital

The Scottish Growth Scheme is a £500 million package of financial support backed by the Scottish Government to help businesses grow. The Scheme currently has two elements: the Scottish-European Co-investment Programme, providing a package of £200m investment into SMEs; and new and additional funding for the SME Holding Fund – a £25m expansion which will lead to £100m invested in SMEs.

The SME Holding Fund is a "Fund of Funds" initiative managed by the Scottish Government, financed by European Regional Development Fund, which addresses gaps in Scotland's finance sector for those SMEs with growth and export potential, by part-funding a number of investment vehicles managed by appointed Delivery Agents. These DSL Business Finance which provides up to £25,000 to micro businesses under the Scottish Microfinance Fund; Business Loans Scotland, a consortium of Scottish Local Authorities with an in-house Fund Manager, which provides loans of up to £100,000 to SMEs; and, Scottish Enterprise, through its Scottish Co-investment Fund and its Scottish Venture Fund which provides early stage equity risk capital up to £2m and within a deal ceiling of £10m to SMEs with high growth potential.

Housing and regeneration financing

The SPRUCE is the ‘brand name’ for the Scottish JESSICA Initiative (Joint European Support for Sustainable Investment in City Areas). It is an evergreen fund originally co-financed with £50m from SG and EU funds and managed by the EIB. Amber, a private sector fund manager seek to secure investments aligned to an agreed investment strategy for which there is a mandate to 2021. The ethos of the strategy is to ensure that SPRUCE can effectively contribute to and marry up with regeneration projects which are consistent with Scottish Government objectives and locally driven policies right across Scotland. The fund is focused on supporting revenue generating projects that support urban regeneration. All investments have a requirement for the recipient to deliver community benefits.

The £40m Infrastructure Investment fund (2017-18) is intended to finance and enable site preparation, installation of essential services and unlock stalled locations so that additional housing can be built provides both debt and equity finance. As the Housing Infrastructure Investment programme matures, an increasing focus is on growth areas and regeneration commitments which are regional economic priorities within City Deal delivery plans.

In the private rented housing sector, Government guarantees, loan investments and PWLB borrowing consents are supporting successful and innovative private sector vehicles in the delivery and scaling up of new house-building for affordable and market rent provision, unlocking key sites and attracting large scale private investment. As expansion progresses towards over 10,000 homes across these programmes, new investments are, wherever possible, seeking to raise quality standards and demonstrate how increased social value can be achieved from housing investment.

Home ownership support schemes provide equity financing to assist home-buying. £70m is available in 2017/18 for SG’s Open Market Shared Equity scheme ( OMSE) to help up to 1,700 first time buyers on low to moderate income; and £65m is available this year for the Help to Buy (Scotland) Affordable New Build and Smaller Developers Schemes to help up to 2,200 households.

Scottish Enterprise

The Scottish Investment Bank ( SIB) is the investment arm of Scottish Enterprise. It fills a number of the functions of other international National Investment Banks within Scotland but its scope and scale is significantly less than sought for the Scottish National Investment Bank.

SIB’s remit is supporting the growth and development of Scotland’s early stage risk capital market operating as a market gap funder. A key part of the remit is to generate positive economic impact whilst investing on a commercial basis. SIB’s remit has expanded over recent years, continuing the innovative, and now established, co-investment approach with a number of new interventions delivered aimed at improving the opportunity for companies to access available funding. All interventions are designed to lever significant private sector funding. Current financial products provided by SIB includes:

Early stage capital (up to £2m)

The Scottish Co-Investment Fund ( SCF) and Scottish Venture Fund ( SVF) – are equity co-investment funds, part-financed by the European Development Fund through the SME Holding Fund, designed to stimulate early stage risk capital investment into high growth potential Scottish companies across a range of sectors given the strong evidence of a long term, systemic market gap constraining company and therefore economic growth. The funds invest up to £2m within a ceiling of £10m, are private sector investor led, catalysing investment into high risk opportunities by sharing the risks (and rewards) with investors where there is an investment gap in a deal.

Growth capital (£2m-£10m)

The Scottish European Growth Co-investment Programme was developed to support companies’ growth and scale up given the lack of available growth capital identified. This innovative programme (the first to be developed in Europe) is a £200m mechanism, £50m of capital commitment from Scottish Enterprise (provided by Scottish Government under the Scottish Growth Scheme) is matched £50m from the European Investment Fund and £100m of private sector capital from a range of UK and European Venture Capital Funds invested in by the European Investment Fund.

Sector support

The Renewable Energy Investment Fund is delivered by the SIB on behalf of Scottish Government. This fund was created to support Scottish Government’s mission to increase energy delivered from renewable sources, reducing the costs of renewable energy and increasing community ownership and development of renewable energy projects. The Fund invests via equity and loans, the Scottish Investment Bank team curates and structures complex deals supporting the development of a new funding market under Scottish Government’s low carbon policy agenda. This Fund transitioning during 2018/19 into a wider focused Energy Investment Fund.

SIB invested £5m alongside a range of other Limited Partners into a £50m life sciences fund based in Scotland, Epidarex LLP, to stimulate higher levels of early stage funding to one of Scotland’s key sectors. This fund invests in and promotes the commercialisation of ground-breaking research and new technologies to address large and unmet needs in today’s healthcare market.

Debt finance

The SIB provides financing of up to £2.75m through an innovative funding model to stimulate growth in a Scottish based Peer 2 Peer lender, the Lending Crowd, adding to diversity and choice for companies struggling to raise debt.


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