Scotland's state bank records £138m loss on back of failed investments

Scotland’s state-backed investment bank has posted a £138m loss after five companies it invested in either failed or collapsed.

The Scottish National Investment Bank (SNIB) recorded its fifth consecutive annual loss since being launched in 2020 by Nicola Sturgeon’s government, which pledged £2bn in public funding over its first decade.

The bank realised losses of £65mn connected to the failures of space-tech start-up Krucial, laser manufacturer M Squared and Trojan, an EV infrastructure firm.

It also recorded unrealised losses of £85mn from writedowns, including anticipated losses from the failure of medical technology developer PneumoWave and rocket company Orbex

The results cover the year to March 31, 2026 and come as early-stage businesses face a difficult funding environment.

SNIB is wholly owned by Scottish government ministers, on behalf of Scottish taxpayers, but operates independently from government.

‘Challenging’ losses

Willie Watt, chair of the SNIB, acknowledged the scale of the losses while stressing that failures are an inevitable part of backing higher-risk businesses.

“Investment losses will always be present in a development bank portfolio, with a mandate to take on higher risk,” he said.

“However, the scale of the realised losses taken together with the provisions made against the portfolio is challenging. Many of these losses relate to the first three years of the bank’s existence and predate tighter investment conditions that were introduced in 2023.

“Our learning and adapting are reflected in our current portfolio and investment practice, as well as our careful study of market trends.

“Businesses are facing a challenging funding and operating landscape, demonstrating that Scotland needs investors, like the Bank, with a long-term view, and this is reflected in the strength of our pipeline.”

The bank said its underlying operations remained profitable.

Excluding investment losses, it generated an operational profit of £12m, with income continuing to exceed operating costs – a position it has maintained since 2023/24.

But the scale of the investment losses means the bank remains firmly in the red overall.

Record investment spree

SNIB has now committed £1.2bn since its launch, helping to attract a further £1.9bn of capital into Scottish businesses and projects.

Its biggest deals during the latest financial year included a £50m investment in Octopus Capital’s Affordable Housing Fund, which SNIB said introduced a new model of affordable housing to Scotland.

It also committed £45m to Highview’s long-duration energy storage facility at Hunterston, targeting energy security and grid stability.

A further £3m went into healthtech company Bioliberty, with SNIB leading its Series A round.

David Ritchie, SNIB’s chief executive, defended the Bank’s long-term approach despite the losses.

He said: “We have been learning lessons from previous investments while recalibrating our processes to capitalise on the opportunities in the current Scottish market.

“We will continue to invest on market-based terms while crowding in private finance. We have ambitious plans, aligned to our clear purpose of accelerating a sustainable, innovative and inclusive Scottish economy.”

Tougher rules after early losses

The bank’s leadership has highlighted that many of the latest losses stem from investments made during its first three years.

Tighter investment conditions were introduced in 2023 as the institution sought to learn from its early experience.

The latest results arrive just weeks after SNIB unveiled an updated investment strategy under Ritchie, who became chief executive earlier this year.

The bank now says it wants to strengthen its ability to retain and recycle capital, allowing it to continue investing over the long term.

It also intends to enter the market to raise and manage third-party capital.

A Scottish Government spokesperson said: “Since its launch five years ago, the Bank has invested more than £1.2bn, attracted a further £1.9bn of private investment and supported more than 3,300 jobs across Scotland.

“These results reflect its role as Scotland’s mission-led development bank, and the nature of investing to deliver long-term economic, social and environmental benefits.

“The Bank’s recent independent five-year review and Audit Scotland’s assessment both recognised the progress made in moving from establishment into delivery and the strong foundations that have been built for the future.

“We are considering the recommendations as part of work with the Bank on its long-term funding. Any future approach would need to align with the Bank’s missions and protect its operational independence”.

Scottish Labour Economy spokesperson Daniel Johnson said: “The SNIB is expected to take some risks, but it is important that it delivers results.

“These losses must be examined, and the bank’s leadership must continue to work to identify investment opportunities that will deliver for our economy and our communities.”