Deposit Return Scheme collapse adds to Scottish National Investment Bank losses

The collapse of the Deposit Return Scheme (DRS) contributed to £14.6m in losses for the Scottish National Investment Bank (SNIB), figures show.

The Scottish Government recycling scheme was shelved after the UK Government refused to allow it to go ahead in its proposed form. 

An exclusion under post-Brexit UK trade laws was rejected over potential disruption for Scottish consumers due to the scheme requiring different labelling and pricing north and south of the border, and the inclusion of glass in Scotland's scheme.

Circularity Scotland, the company formed to administer DRS, collapsed at a cost to SNIB of £8m.

A pan-UK replacement scheme has been delayed until 2027.

The bank, which was established in 2020, reported pre-tax losses of £14.6m for April 2023 to March 2024, down from £20.2m the previous year.

The bank said the loss was “predominantly” a result of its failed investments and noted that, with investment income sitting at £19.3m while operating costs were £16.1m, it made an underlying profit of £3.2m for the year. It is the first time since launch it has achieved an operating profit.

Chairman Willie Watt said "clear and demonstrable achievement and progress" has been achieved in the bank’s third full financial year of operation.

Watt stated: "The bank was established to be an impact investor, to drive growth in our economy, provide financial returns on public capital and deliver social impact.

"These are long-term goals and we are operating in a challenging macroeconomic environment, which makes our progress all the more significant.

"The bank’s income exceeded operational expenses for the first time. This is significant but we are conscious that in our early years this remains sensitive to the mix of investments, continued deployment, and availability of capital to invest.

"This acceleration towards profitability has been progressive, with our income growing significantly year-on-year.

"A key factor in this was the clarity provided by Scottish ministers at the time of our founding, with a bold commitment to capitalise the bank with £2bn over 10 years.

“The bank was conceived as a perpetual institution that would redeploy investment returns for the people of Scotland and we need to make this structure a reality."

Deputy First Minister Kate Forbes said: "Having achieved an operating profit and nearly doubled its annual operating income in only its third full year since opening for business, the figures demonstrate a strong performance and increasingly promising future for the publicly owned Scottish National Investment Bank.

"The key missions of the bank remain closely aligned to the first minister’s priorities, and it continues to make strategically important investments – from green energy to our net zero transformation and high-growth innovation – to help shape a strong, growing and vibrant Scottish economy."