Scotland to launch ‘kilt’ bonds as it seeks to become an investor friendly destination

The Scottish government announced plans on Thursday to issue its first sovereign bonds in 2026/27, as it looks to raise funds for infrastructure investments.

It will be the first issuance in a planned £1.5 billion ($1.97 billion) bond program that’s set to be rolled out over the next parliamentary period, which begins with elections in May next year. However, officials noted that the plans were subject to the outcome of the government elections.

Scotland is part of the U.K., but operates as a devolved nation, which means it has its own government. While the Scottish parliament has certain limited powers over income tax and parts of the economy, decisions on macroeconomic policy are reserved to the U.K. government.

On Wednesday, S&P Global and Moody’s gave the Scottish government its first credit ratings, with agencies awarding Scotland ratings equivalent to the U.K. – and higher ratings than the governments of Spain, Italy and Japan.

‘Investor friendly destination’

“The Scottish Government’s high credit ratings are testament to Scotland’s strong institutions, track record of responsible fiscal management and pro-business environment,” Scotland’s First Minister John Swinney said in a statement on Thursday.

He argued the issuance of Scottish government bonds — which have become colloquially known as kilts — are a step toward “a prosperous future where our country takes responsibility for its own decisions.”

“Whilst specific issuance plans will be subject to market conditions closer to the time, we will shortly commence engagement with banks to act as joint lead managers to enable the next Scottish Government to proceed without delay,” Swinney added on Thursday.

Scotland’s government was granted the power to issue its own bonds almost a decade ago, but until now has borrowed money using the U.K.’s National Loans Fund.

In 2023, the Scottish Government’s Investor Panel recommended floating sovereign bonds on the public market as a means of raising the country’s profile and attracting inward investment.

Scotland’s credit rating would help the country make progress toward these ambitions, said Angus Macpherson, chairman of financial advisory firm Noble and Co, and former co-chair of the Investor Panel.

“This is a positive step forward and demonstrates they are serious about becoming a more investor friendly destination,” he said in a Thursday statement.

Accounting giant EY is advising the Scottish government on its bond issuance.