1st August 2026
Economic development organisations are often asked to perform an almost impossible task: transform regions, create jobs and encourage investment in places where the private sector may be reluctant to take risks. But when some supported projects fail, criticism quickly follows.
The debate raises a fundamental question:
How should we judge organisations whose purpose is to take risks?
Bodies such as Highlands and Islands Enterprise (HIE), Scottish Enterprise and similar agencies are not ordinary businesses. They are not expected to make profits or avoid every failure.
Their role is to support economic activity that may not happen without public intervention.
The challenge is deciding whether the risks taken create enough long-term benefit to justify the failures.
Why economic development agencies exist
In a purely commercial economy, investment tends to flow towards areas offering the highest immediate returns.
That usually means:
Larger populations.
Better transport links.
Lower operating costs.
Easier access to markets.
Remote areas often face disadvantages.
The Highlands and Islands, for example, have:
A dispersed population.
Higher transport costs.
Skills shortages.
Limited local markets.
An ageing population.
Without intervention, some opportunities may never develop.
Economic development agencies therefore attempt to overcome these barriers by supporting:
New businesses.
Infrastructure.
Innovation.
Skills development.
Investment projects.
Emerging industries.
Risk is unavoidable
Innovation by definition involves uncertainty.
If an organisation only supports projects guaranteed to succeed, it is unlikely to create major economic change.
Many industries that are now considered essential began with uncertainty.
Examples include:
Renewable energy.
Digital technology.
Advanced manufacturing.
Life sciences.
Some projects will fail.
That does not automatically mean the original decision was wrong.
A sensible investment decision can still fail because circumstances change.
Markets move.
Technology develops.
Costs rise.
Companies make mistakes.
The important question is whether the decision was reasonable based on the information available at the time.
The problem of judging public investment
A private company can be judged by:
Profit.
Revenue.
Shareholder returns.
Economic development agencies require different measures.
Their success may include:
Jobs created.
New businesses established.
Skills developed.
Private investment attracted.
Communities strengthened.
Future industries created.
The difficulty is that many of these benefits take years to appear.
A new energy project may take a decade before its full economic impact becomes visible.
Not every failure is evidence of failure
There is a temptation to judge agencies by individual cases.
A supported company closes.
A project does not reach its targets.
An investment loses money.
These events naturally attract attention.
However, a portfolio approach is often more appropriate.
Venture capital investors expect some investments to fail because successful investments generate returns that outweigh the losses.
Economic development agencies operate differently, but the principle is similar.
Some risks are necessary if a region wants to change.
But risk is not an excuse
Accepting risk does not mean accepting poor decisions.
Public organisations must still demonstrate:
Proper assessment.
Clear objectives.
Strong management.
Independent evaluation.
Lessons learned from mistakes.
A failed project may have been a reasonable risk.
A poorly planned project is different.
The real measure of success
The key question should not simply be:
"How many projects succeeded?"
A better question is:
"Did these interventions create more economic opportunity than would have existed without them?"
That means examining:
Whether private investment followed.
Whether new industries developed.
Whether communities became stronger.
Whether future opportunities were created.
The Highland challenge
For areas such as Caithness and the wider Highlands, economic development is particularly challenging.
Traditional industries have declined, while new opportunities are emerging in areas such as:
Renewable energy.
Engineering.
Tourism.
Digital services.
Specialist manufacturing.
Creating this transition requires investment and patience.
The alternative may be continued population decline and economic stagnation.
Economic development organisations should not be judged by whether every project succeeds.
A region that takes no risks is unlikely to transform.
However, public confidence depends on transparency and honest evaluation.
The question is not whether failure occurs.
The question is whether the successes create enough lasting economic benefit to justify the risks taken.