The Scottish National Investment faces a loss of up to £9m in Scotland

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By Angus Cochran, BBC Scotland News, Jun 21, 2023 at 10:59 BST

Updated 36 minutes ago

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Willie Watt, head of the Scottish National Investment Bank, says he hopes it will not lose all funding

The head of the state-owned Scottish National Investment Bank has said it expects to lose more than half of a £9m loan given to Circularity Scotland.

Willie Watt told MSPs the entire amount could be lost after setting up the company to administer a deposit return scheme in Scotland for which officials have been called.

Circular Economy Minister Lorna Slater said she had to delay the plan until 2025 after Westminster put it in an “impossible situation”.

The UK government has rejected this claim.

A spokesperson said the decision to postpone was taken entirely by the Scottish government.

Circularity Scotland chief executive David Harris said the scheme remained “viable” even after the UK government imposed conditions including removing glass from the initiative.

The publicly owned Scottish National Investment Bank has agreed a £9m debt facility with Circularity Scotland in May 2022 to fund the start-up costs of running the Deposit Return Scheme.

Slater, who survived a no-confidence vote in parliament on Tuesday, described the company’s collapse as a “catastrophe” for its 66 employees.

Mr Watt told the Holyrood Economics and Fair Work Committee: “We don’t know exactly what the impact will be but I think it’s fair to say there will be significant losses in the loan we made to Circularity Scotland.”

He added, “I am confident that the losses will exceed 50%, but I hope it will be less than 100%.”

The investment bank chief said Circularity Scotland, a non-profit organization funded by the drinks industry, did not have “enough capital” to deal with the delay from March 2024 until at least October 2025.

‘Fiercely independent’

Administrators work through a “creditor hierarchy,” Mr. Watt told middle-service providers, including employees, commercial creditors and banks, before filing reports in “a short number of weeks.”

He insisted that the loan had been approved after “significant due diligence” from the bank, and said there had been no involvement from the Scottish government in its decision.

“We make all our decisions completely independently of the Scottish government,” he said. “We are a fiercely independent enterprise.”

He said the investment bank was not considering suing the government to recover the money.

“I don’t think that would be an appropriate course of action but we will look at all of our options.”

Image source, Getty Images

photo caption,

Circular Economy Minister Lorna Slater blamed the UK government for delaying the recycling scheme

Slater told BBC Good Morning Radio Scotland the scheme had been delayed earlier this month because the UK government had made “malicious” demands at the “last possible moment”.

She said: “The intervention we received from the Conservative government in Westminster to torpedo our scheme has had negative consequences for Scottish businesses, Scottish workers and of course our master recycling scheme.” “It is devastating for all of us.”

Green MSP said that as well as calling for the glass to be removed from the scheme, the UK government had requested that Scottish plans to place a 20p deposit on some items match UK plans for a scheme to be launched in 2025.

“But the important thing is they don’t have the regulations for that, and they can’t tell me what that is,” she told BBC Scotland.

‘impossible’

“You can put together deposit return schemes without glass – there are a few of them in the world and that’s not the best way to run a scheme but you can do it.

“The problem is these other conditions that the British government dropped on us at the last possible moment. They made that impossible.”

She said she could not comment on what would happen to the funding provided by the Scottish National Investment Bank.

“The investment decisions made by the SNB are theirs, and they are independent of the government,” Slater said.

Circularity Scotland estimated that it, investors and retailers spent hundreds of millions of pounds in anticipation of the scheme, while its service partner Biffa spent around £80m on infrastructure.

“I don’t think that will be lost because we intend to move forward with the deposit return scheme,” Slater said.

“It has now been delayed until 2025 because that is when the UK government says it will be able to get its scheme up and running.”

Image source, Getty Images

The scheme would have seen a 20p deposit added to the price of single-use containers of drinks sold in Scotland.

The customer will then get this deposit back when they take the empty container to a return point, either over the counter in a store or using an automated reverse vending machine.

The BBC has heard allegations from sources close to Circularity Scotland that workers have not been paid a full month’s wages.

However, Mrs. Slater told the room that it was her understanding that the staff had been paid for the work they had done.

It said employees had also received support from the Partnership for Continuing Employment – the government’s surplus support service.

The Scottish National Investment Bank was set up in November 2020, with its aims said to be “in line” with the government’s economic strategy – including financing projects designed to cut carbon emissions, boost innovation and reduce inequality.

Ministers pledged to fund the Bank with £2 billion over 10 years.

Watt said the bank added 13 new investments to its portfolio in 2022-23 and committed £221m of capital, up 56% on the previous year.

Its income rose to £10.7m from £1.9m in 2021-22, “significantly reducing the obligation of taxpayers to cover our operating costs”, he told service providers.

Scottish Liberal Democrat economy spokesman Willie Rainey said there were “serious questions” about the £9m loan.

He warned that taxpayers could be among the “long list of people left out of pocket by the mess the Scottish government has created”.

Jamie Halcrow-Johnston, the Conservative Party’s trade spokesperson, has accused Ms Slater of refusing to listen to the companies or Circularity Scotland about the deposit scheme.

He blamed it for “the loss of Scottish jobs and the scandalous waste of millions of pounds of taxpayers’ money”.

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