Whitehall sources say concerns over the independence referendum played a major part in the announcement by Business Secretary Vince Cable and led to a name change – adding the letters UK to emphasise Scotland’s place in the Union.
The decision to base the new bank in Edinburgh was widely welcomed by businesses and environmental groups. It is expected to attract investment to Scotland’s capital, which saw off challenges from 32 other contenders including Leeds, Cardiff, Manchester, Bristol and Birmingham.
However, some concerns have already been raised that the bank’s HQ may be little more than a “brass plate” address, with the significant work happening in London, where the bank’s transaction team will be based.
The investment bank, which was first proposed by former Labour chancellor and Edinburgh South West MP Alistair Darling, has been set up to help drive £200bn investment in renewable energy infrastructure. It will have £3bn of government money to help provide loans and investment but will be cash-limited until 2017.
Between 50 and 70 jobs will be created, and the aim is that board meetings will take place in Edinburgh and eventually half the jobs will be in the city.
Explaining his decision, Mr Cable said he was “harnessing the strengths of Edinburgh and London” to support the plan to make the Green Investment Bank (GIB) a world leader. He said: “Edinburgh has a thriving green sector and respected expertise in areas such as asset management. London, as the world’s leading financial centre, will ensure that the GIB’s transaction team can hit the ground running.
“This decision will allow the GIB to operate effectively and achieve its mission of mobilising the additional investment needed to accelerate the UK’s transition to a green economy.”
A Whitehall insider confirmed the independence referendum “was very much part of the decision”.
He said Lib Dem Scottish Secretary Michael Moore had asked for it to be called the “UK” Green Investment Bank to “emphasise the strength of the UK working together with the bank headquartered in Scotland’s capital and work being carried out in the UK’s capital city”. He went on: “It’s very much part of the message, ‘stronger together and weaker apart’.”
Lib Dem Edinburgh West MP Mike Crockart, who led the political campaign to bring the bank to Edinburgh, said the team had deliberately “tried to avoid the referendum issue”.
He said: “The Business Secretary has made the right decision and made it for the right reasons. For the past 16 months, I have been arguing that Edinburgh is the best choice for the location of the Green Investment Bank because of its strength in depth in both financial services and green technology. It is this co-location that will make the bank a success and make Edinburgh a European centre of excellence for green investment.”
A decision on where in Edinburgh the bank should be based has not yet been taken, but Mr Crockart is pushing for it to be in Edinburgh Park, near the new tram interchange and Royal Bank of Scotland’s headquarters.
Mark Lazarowicz, the Labour MP for Edinburgh North and Leith, who spearheaded Labour’s campaign to win the bank for Edinburgh, said: “This is a victory for Edinburgh and a victory for common sense. Edinburgh is the perfect city for the Green Investment Bank, being close to renewable sites and with a centuries-old tradition of banking.
“This shows what we can do when we work together. Being part of the UK allows Scotland to win investment we would be less likely to if we were separate. This means the renewables revolution can start at home.”
The decision was welcomed by First Minister Alex Salmond. He said: “The decision recognises Scotland’s position at the vanguard of the renewables revolution and follows an excellent and professional bid campaign. It is great news for Edinburgh’s economy and for Scotland’s thriving low-carbon sector.”
However, some in the SNP warned the GIB had to have a real presence if it was not to be more than an empty gesture.
Last night, the Department for Business, Innovation and Skills said it would be up to the new board where staff were based and if the bank’s senior director was in Edinburgh or London.
The SNP’s Westminster energy spokesman, Mike Weir MP, said: “It is deeply embarrassing for Michael Moore that some of his UK government colleagues appear to be undermining him by trying to minimise the importance of the Green Investment Bank headquarters for Edinburgh and for Scotland.”
Business and environmental groups in Scotland said the decision would boost the renewables sector north of the Border.
Edinburgh Chamber of Commerce, which led the business side of the bid, said the cross-interest and cross-party approach should be the model Scotland uses to win UK developments.
Owen Kelly, chief executive of Scottish Financial Enterprise, said: “The establishment of the Green Investment Bank is a real step forward in the commercialisation of low-carbon technologies in the UK and I am delighted that it will be based in Edinburgh.”
Friends of the Earth Scotland’s chief executive Stan Blackley said: “Basing the bank in Edinburgh will further boost Scotland’s vital progress with green technologies. While the location of the bank is important, what is absolutely crucial is that it has real teeth. It can’t just be simply a government fund, but needs to have full borrowing and lending powers from day one.
“A flourishing Green Investment Bank will be vital to drive the billions of pounds of low-carbon energy investment and job creation that is required. It’s worked brilliantly in Germany, and it can be work here in the UK as well.”
Fife-based M&C Energy Group said the decision “shows recognition of Scotland’s efforts to become a powerhouse for green energy development”.
However, its environmental specialist Andy Dewis said: “With UK investment estimated to still be at less than half of that required to meet the greenhouse gas reduction targets, the GIB can only be a step forward. But given the current restrictions placed on the bank itself, this is unlikely to be enough alone to help meet the investment requirements of those targets.”