Holyrood has allocated £181 million to SNIB in its latest budget for the bank to use between April 2024 and March 2025. Bank bhairman Willie Watt expressed concerns over the £60m cut.

He told The Times: “I think the budget settlement was difficult. It has necessitated a greater focus on what we can do, and that has probably narrowed what we can do.

“We are monitoring carefully how many new investments we can make. The challenge with the settlement is we have a lot of multi-year commitments. Of our [annual] budget quite a significant proportion is taken up by things we have committed to in the past.

“So the impact of the budget settlement on our ability to do new investments is actually greater. We will inevitably make fewer investments because of that.”

Despite the budget constraints, SNIB has successfully deployed £640m, £225m of which was only in the last fiscal year. This has attracted £1 billion of additional investment and resulted in the supporting of 1,850 jobs.

Although the bank achieved an operating profit in the last financial year, the budget reduction is projected to result in an operating loss for the current year.

Mr Watt emphasised the bank’s commitment to profitability and reducing its reliance on government funding. However, challenges remain in attracting and retaining talent due to competition from the private sector and concerns about the impact of Scotland’s income tax regime on the bank’s operations.