A NEW study has warned that a state-owned bank is ‘unfocused and poorly designed’ – amid calls for an overhaul of its operations.
Think tank Reform Scotland has researched the Scottish National Investment Bank (SNIB), which was set up by the Scottish government with a budget of £2 billion.
In his report, business expert Prof Ross Brown claimed that SNIB had been given a “vague” mission and that its impact had been “limited”.
Professor Brown, who is professor of entrepreneurship and small business finance at the University of St Andrews School of Management, warned that the Scottish Government‘s broad remit for SNIB had unwittingly prevented specific investments in the business she had to do.
He pointed out that only seven companies had received funding from the public bank so far, saying it had created very limited economic impact.
Professor Brown recommended that SNP ministers consider channeling resources to SNIB from other organizations such as Scottish Enterprise.
He said: “SNIB looks blurry and poorly designed, and that blurriness created unnecessary mission creep. This is not an effective strategy for a public bank, especially given the very high levels of compensation granted to the management team.
“More importantly, the strategic deficiency of SNIB is reflected in the very small number of projects currently financed by the bank, which is likely to lead to a very modest economic impact in the short and medium term.
He added: “If Scotland is to become a truly ambitious and enterprising ‘start-up nation’, public policy in Scotland will need to become much bolder and imaginative than it is at present. To do this, the Scottish Government must press the reset button on SNIB.
“The bank needs a clearer definition of its core strategy and customer base. Basically, the Scottish Government must decide whether the bank is designed to help develop the green infrastructure of the Scottish economy or to propel business growth in SMEs in Scotland. The two are very different goals and using the same instrument to achieve both seems ill-advised at best and reckless at worst.
Chris Deerin, Director of Reform Scotland, added: “Reform Scotland have welcomed the establishment of SNIB and continue to believe it is a worthy and important project.
“Its first few months have not been smooth, but that is often the case with start-ups, and in our experience it has a great board and a strong management team. exactly the kind of grand, ambitious political experiment that Holyrood should be undertaking, and we would like to see similar ambition and risk-taking in other areas of government activity.
“We see no reason why SNIB should not be a long-term success. And we hope that this article, in its spirit of constructive criticism, can play a small role in helping him achieve this happy result.
A Scottish Government spokesperson said: “Over the past 18 months, Scottish National Investment Bank, the board and management team have put in place an operational structure, recruited over 50 staff and provided over £200m of investment commitments to 16 projects.
“He will continue to play a key role in supporting the development of a fairer and more sustainable economy.”