14th June 2026
For decades, Highlands and Islands Enterprise was the economic backbone of the far north. It wasn’t perfect, but it was one of the few institutions that understood the basic truth of life in Caithness: distance costs money, and if the state doesn’t step in, the market won’t. HIE’s job was to level that playing field—supporting employers, attracting investment, and keeping fragile communities viable.
Over the last ten years, that foundation has been quietly eroded. HIE’s budget has been squeezed year after year, Scottish Enterprise has faced similar reductions, and local government funding—despite political claims of “record investment”—has fallen sharply in real terms once inflation is accounted for. The combined effect has been a slow, grinding weakening of the very institutions that once held the Highlands together.
Caithness feels this more than most.
The Shrinking of HIE: A Slow Unravelling
HIE’s budget has not collapsed overnight; it has been chipped away. The 2024–25 cut—from £62.8 million to £54.8 million—was only the latest in a long line of reductions. But in a region where every intervention costs more because of geography, even small cuts have outsized consequences.
When HIE’s budget tightens, the first things to go are the discretionary, place‑based investments that once made a tangible difference in Caithness: support for local firms, targeted regeneration, early‑stage innovation, and the kind of risk‑taking that private investors avoid. What remains is a narrower, more cautious agency, increasingly tied to national priorities rather than regional needs.
The irony is that Caithness needs more intervention now, not less. The post‑Dounreay transition is still incomplete, the private sector base is thin, and the distance from central Scotland makes organic growth difficult. Yet the very agency designed to address these structural disadvantages is being asked to do more with less.
The Parallel Decline of Scottish Economic Development
HIE is not alone. Scottish Enterprise has faced its own budget pressures, and the broader economic development landscape has shifted away from regional investment towards national skills and employability programmes. These programmes have value, but they do not replace the hard graft of building local economies.
The result is a hollowing out of Scotland’s regional development capacity. Agencies that once had the autonomy and resources to shape local futures are now constrained by national frameworks, reduced budgets, and a policy environment that prioritises skills over place.
For Caithness, this means fewer levers to pull, fewer tools to use, and fewer opportunities to anchor jobs locally. The economic development system has become more centralised, more generic, and less responsive to the realities of the far north.
The Council Funding Illusion: “Record Amounts” That Buy Less Every Year
Alongside the squeeze on HIE and Scottish Enterprise, local government has endured a decade of real‑terms cuts. The Scottish Government often points to “record funding” for councils, but this is a political phrase, not an economic one. In cash terms, the numbers may be higher—but inflation has eaten away the value of every pound.
When inflation runs at 5, 8, or even 10 percent, a small cash increase is actually a cut. Councils know this. Audit Scotland knows this. Communities feel this. But the headline remains the same: “record funding”.
For Highland Council, the consequences are stark. A vast geography, ageing infrastructure, and rising demand collide with shrinking real‑terms budgets. The council has less capacity to co‑fund projects, less ability to maintain assets, and less room to support local economic development. When both HIE and the council are under pressure, Caithness loses twice.
What This Means for Caithness
The cumulative effect of these trends is visible across the county. Projects take longer. Investment is harder to secure. Local businesses face more obstacles and fewer supports. Regeneration plans stall. Opportunities that once might have been backed by HIE or the council now struggle to find a sponsor.
This is not because Caithness lacks potential. It is because the institutions designed to nurture that potential have been weakened. The shift towards national skills programmes may help individuals, but it does not replace the need for place‑based investment. Training people for jobs that don’t exist locally is not a development strategy; it is a managed decline strategy.
Caithness needs the kind of long‑term, regionally tailored investment that HIE was created to deliver. It needs a council with the resources to act as a genuine partner. It needs a Scottish Government that recognises that “record funding” is meaningless if inflation has already spent the increase.
A Region That Cannot Afford Further Drift
The far north has weathered many storms, but it cannot weather a decade of under‑investment without consequences. The erosion of HIE’s budget, the weakening of Scottish economic development, and the real‑terms decline in council funding form a single story: a slow centralisation of power and resources away from the Highlands.
If Scotland wants Caithness to thrive—not merely survive—it must restore the balance between national programmes and regional investment. Skills matter, but they cannot substitute for employers. Training matters, but it cannot replace infrastructure. And “record funding” means nothing if it buys less every year.