Scottish Government dodges defence investment reform despite war in Ukraine

In a response from the Scottish Government, Deputy First Minister and Cabinet Secretary for Economy and Gaelic, Kate Forbes MSP acknowledged the critical role played by Scotland’s defence sector and condemned Russia’s invasion of Ukraine – but refused to commit to any change in the Scottish National Investment Bank’s investment policy.

Poynton had urged the Scottish Government to revise the Bank’s restrictive rules that prevent it from backing companies engaged in the manufacture of defence equipment – a sector he described as “vital” to both the Scottish economy and to the security of democratic allies such as Ukraine.

However, Forbes confirmed that the Bank remains barred from investing in firms primarily involved in defence manufacturing, citing its existing ethical investment policy. While she pointed to support provided by Scottish Enterprise for businesses in the aerospace and shipbuilding sectors, this support explicitly excludes munitions and weapons – the very areas where investment shortfalls are most acute.

Gregor Poynton MP speaking in the House of Commons

Commenting on the Scottish Government response, Gregor Poynton said: “It’s not good enough. We need to be honest about the fact that the defence industry in Scotland plays a crucial role not just in our economy, but in protecting lives in Ukraine, across NATO, and here at home.

“This was a chance for the SNP Government to match its words with action. Instead, they’ve opted for platitudes while continuing to handcuff the Scottish National Investment Bank.”

Earlier this year, Poynton raised the issue directly at the House of Commons Business and Trade Committee, where leaders from the defence industry backed his position.

Senior figures from Airbus, BAE Systems and Babcock all agreed that SNIB’s current stance was out of step with reality.

Oriel Petry, Senior Vice President at Airbus UK, said allowing defence investment in Scotland “would strengthen the industry,” while BAE’s Adam Forgiel-Jenkins and Babcock’s John Howie both described the change as a “no-brainer.”

With UK defence spending set to rise from £66.3 billion this year to £79.7 billion by 2027/28 – and up to 3% of GDP in the next Parliament – Scotland’s industrial base is at risk of being left behind.

Gregor Poynton has warned that that without urgent reform of SNIB’s mandate, Scotland will miss out on billions in investment and thousands of high-skilled jobs.