The Scottish Government recently announced its first foray into the bond market, with the proceeds set to be put into infrastructure projects. A hard fought power, it was devolved from the UK government in the Scotland Act 2016, which devolved a range of powers and came in the wake of the independence referendum that saw voters choose to remain part of the Union.
According to First Minister Humza Yousaf, issuing a bond will “help raise Scotland’s profile and engagement with international investors to attract investment”, with the money set to go towards key infrastructure projects.
Rereading the write-up of a recent Partnerships Bulletin/Burges Salmon roundtable on Scotland’s future, it’s hard not to notice the slightly flat feeling about the country’s private finance prospects, particularly as it competes internationally against heavyweights like those across the Pond or in the Gulf.
So, is this bond a shot in the arm?
Some in the industry are welcoming the initiative as a “positive”, especially its potential to attract investors who do not otherwise invest in infrastructure.
Furthermore, the US’s approach of bond-issuing jurisdictions has created a very dynamic and flexible system, with the connection between the purse strings and community heart strings being that much closer.
If Scotland can produce something of a copy of that system and use it to kickstart projects, and generate a pipeline with these bonds, it could be an interesting new brightspot for the whole country.
But the message from the industry is clear: we’ve got the money - just tell us where to put it.
“It's all just great soundbites,” bemoans one international investor. Funding is not the issue, they say. Instead, it’s the direction of travel and creating the environment for investment. That is what the other jurisdictions provide, enabling them to syphon off the global infrastructure money and attention.
The point is compounded by the fact that Scotland already has a public sector infrastructure bank (the Scottish National Investment Bank) to provide public sector support and drive investment into key sectors, not to mention the UK Infrastructure Bank (UKIB) that was launched in 2021.
Institutions such as these are meant to provide something of both the investment and the direction that the industry is after.
So, Yousaf’s bonds might be, as one industry leader suspects, just a bit of electioneering ahead of next year.
But that in itself is interesting, what may come as a result of that selection could be a lot better than a bond:
This week, some infrastructure industry heavyweights met with the UK Labour Party in London as part of the opposition party’s newly established British Infrastructure Council.
“Under the right conditions, there are significant pools of private capital available to finance investment in critical national infrastructure,” shadow chancellor Rachel Reeves said.
This will be music to the ears of investors and developers alike.
If the current polling proves anywhere near accurate come election day, Labour will pick up a hefty portion of Scottish seats, meaning Reeves and her team will feel obliged to give these constituencies some return on their political investment.
Perhaps that’ll be a bit more than just some soundbites - although it will also require Labour in Westminster to work effectively with the SNP government in Holyrood, with no election in the Scottish Parliament due until May 2026.