£9m investment bank loan to deposit return firm could be lost, chairman admits

The chairman of Scotland’s state-owned investment bank has conceded the full £9 million loan given to Circularity Scotland could be lost as the firm enters administration.

The Scottish National Investment Bank (SNIB) used taxpayer cash to invest in the firm set up to run the deposit return scheme (DRS), however the bank acts independently from the Scottish Government.

In evidence to Holyrood’s Economy and Fair Work Committee on Wednesday, Willie Watt told MSPs a “significant” sum of the loan could be lost, before admitting the bank faces losing its full investment.

He said: “We don’t know exactly what that impact will be. But I think it’s fair to say there will be significant losses on the loan that we have made to Circularity Scotland and we will report those losses once we know what they are.

“I’m sure that the losses will be in excess of over 50%, but I hope that they are less than 100%.”

But when asked by Conservative MSP Graham Simpson if the whole £9 million could be lost, Mr Watt conceded: “Yes, we could. That is the truth.”

Mr Watt denied that Scottish ministers influenced the investment bank’s decision to fund Circularity Scotland, adding: “We make all of our decisions totally independent of the Scottish Government. We are a fiercely independent institution.

“There was no involvement from the Scottish Government in our decision to make the loan.”

However he said the lenders took “comfort” from ministerial statements which committed to the scheme.

His comments came after Lorna Slater, the minister in charge of the DRS, confessed she could not say whether the SNIB would be reimbursed for the loan.

The Green circular economy minister told BBC Radio Scotland’s Good Morning Scotland programme that Circularity Scotland’s decision to call in administration was “absolutely a disaster” for its 66 employees.

The company had been set up to run the DRS, a recycling initiative which imposes a refundable deposit on drinks sold in cans and bottles.

But the Scottish Government has delayed the scheme’s launch again, pushing it back from March 2024 to October 2025 at the earliest after the UK Government said the Scottish scheme could not include glass bottles and that the deposit charged must be the same in Scotland as in England – where the deposit level is still to be determined.

Ms Slater said: “The interference that we have had from the Conservative Government at Westminster to torpedo our scheme has had these negative consequences for Scottish businesses, for Scottish workers, and of course or flagship recycling scheme.

“The decision to stop the scheme was because the UK Government had put us in an impossible position.”

Asked what will now happen to the cash from the SNIB, Ms Slater said: “The Scottish National Investment Bank is independent of the Scottish Government, so that isn’t something we have any sort of say in.

“The investment decisions of the Scottish National Investment Bank are for them, they are independent of Government and they make their own decisions about that investment.”

Ms Slater also refused to say if SNP MSP and former rural economy secretary Fergus Ewing should be sanctioned by his party after he voted against her in a motion of no confidence on Tuesday.

Scottish Liberal Democrat economy spokesman Willie Rennie said: “This is an extremely difficult time for Circularity Scotland staff, whose jobs are at stake because our two governments are incapable of working with one another.

“The £9 million loan from the Government-backed bank raises serious questions about whether that money would be lost in the event of its collapse, adding taxpayers to the long list of people left out of pocket by the chaos wreaked by the Scottish Government.

“Staff need to know if they will be paid. Taxpayers also need answers on the amount outstanding on the loan and whether any of that debt can be recovered in the event of administration.”

Jamie Halcro Johnston, business spokesman for the Tories, said: “Willie Watt maintained that had ministers expressed concern about the viability of DRS, the SNIB’s decision may have been different.

“That shows that Lorna Slater’s stubborn refusal to listen to business concerns, or to Circularity Scotland themselves, led directly to this fiasco, the loss of Scottish jobs and the scandalous waste of millions of pounds of taxpayers’ money.”