Wales is getting a £130m fund to back the growth prospects of Welsh firms, Chancellor Rishi Sunak confirmed in his Budget.
The funding will be assigned to the Ƶ Government’s economic development bank, the British Business Bank.
As with its other regional investment funds in England, the bank will outsource its fund management through a competitive bidding process.
This throws up the potential for an appointed fund manager bolstering the £130m by sourcing additional private investor backing.
It is understood that the idea of a specific Welsh fund was something of a last minute consideration by the Treasury. BusinessLive Wales has consistently called for a British Business Bank fund for Wales.
The British Business Bank said it was too early to say when the fund could become operational. Any split between debt and equity will be demand led.
The Chancellor also confirmed that the British Business Bank will receive a further £150m to invest alongside angel investors - including in Wales.
It is not clear whether the Welsh Government’s wholly-owned investment bank, the Development Bank of Wales, would look to bid for the fund manager contract for the £130m Welsh fund, or whether as a publicly-funded lender itself it could run another publicly-funded fund. However, it said: “We welcome the Budget announcement of £130m for the British Business Bank to set up a fund for Wales, a commitment which recognises the vital role of small businesses in the Welsh economy. We look forward to further details of the fund in due course, and to continuing to work together to ensure that SMEs can access the funding they need.”
The development bank can currently invest up to £10m per investment. If it doesn’t run the new fund it could look to investment alongside the British Business Bank into Welsh firms.
Welcoming a specific fund for Wales the Rhondda-born chief executive of the British Business Bank, Catherine Lewis La Torre, said: "The package the Chancellor has announced today enables us to build on our range of programmes to support sustainable economic growth by increasing the supply, diversity and demand for finance for Ƶ smaller businesses.
“This includes delivering a new £130m fund dedicated to supporting smaller businesses in Wales. We look forward to working with the Development Bank of Wales and local stakeholders to deliver this increased support.
We also welcome the £150m provided to support regional angel finance across the Ƶ, and resources to provide 33,000 Start-Up Loans over the next three years.”
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A spokesman for Cadlys Capital said: “This announcement is extremely welcome as it represents an unprecedented boost to the investment scene for Welsh firms seeking to scale up and expand their businesses. It will create an opportunity for a diversification of investors and create a lasting legacy to advance the nascent Welsh fund management industry. Cadlys is a Welsh headquartered fund management initiative that was founded with this vision in mind.
“Cadlys has the ambition to work alongside existing stakeholders to boost the development and growth of the Welsh economy. Its successful founders feature some of the most seasoned Welsh investors and venture capitalists. Gerry Holtham, former chief investment officer of Morley Fund Management is the Cadlys chairman and is joined by amongst others Roger Maggs, founding partner of Anglo-Canadian technology venture specialist Celtic House Venture Partners and Owen Matthews of Wesley Clover.”
Paul Slevin, president of Chambers Wales, said: “SMEs are the lifeblood of Welsh business and play a vital role in the growth of our economy. This multi-million-pound commitment to specifically support small and medium sized businesses in Wales is a welcome investment to enable future growth, particularly after the challenges of operating throughout the pandemic.
“We understand that the fund will be delivered through the British Business Bank and it is essential that we now receive clarity on eligibility criteria, funding channels and how to access support to ensure that as many SMEs as possible can benefit from this funding opportunity.
“We look forward to speaking with industry leaders over the coming weeks to better understand the implications of the budget for their business and how we can assist them to unlock their growth potential.”
The Ƶ Government has not been allowed the Welsh Government to oversee the replacement funds for European Union structuring funding, like the Levelling Up and the Community Renewal funds and the yet to be finalised Share Prosperity Fund.
The Chancellor announced £121m for 10 signed projects in Wales under the Levelling Up Fund, including to revitalise the Pontcysyllte Aqueduct and Canal world heritage site, a dualling of the A4119 in South Wales and to redevelop the Theatr Brycheiniog Arts Centre in Brecon.
Mr Sunak said the Welsh Government will receive an average of £18bn per year in Barnett-based funding - representing a 2.6% annual rise over his next three year spending review period. The Welsh Government will now receive around £120 per person for every £100 per person of equivalent Ƶ Government spending in England.
While not new money the remaining Ƶ Government funding contribution to the Cardiff Capital Region’s £1.3bn City Deal will now be provided more quickly.
The outstanding £105m, which had been planned to be provided over the next nine years, will be accelerated from the 2022-23 financial year.
This will fast-track support, including for advanced manufacturing capability in the region. The Welsh Government is also a backer of the City Deal, covering the ten local authorities of south-east Wales.
A decision to accelerate Ƶ Government backing for the Mid Wales and North Wales Growth Deals, and the Swansea Bay City Region City Deal, was announced back in the March.
The cut in the domestic band of air passenger duty will provide a boost for Cardiff Airport, along with regional airports in the rest of the Ƶ, from 2023.
Welsh Government Finance Minister Rebecca Evans, said: “This Ƶ Government Spending Review hasn’t delivered for Wales. Vital funding priorities, such as the long-term remediation of coal tips and greater funding in rail infrastructure, have been ignored.
“While the Spending Review does give us some medium term financial certainty and some additional investment, it is more than offset by the inflationary and system pressures that we are facing. The budget fails to meet the scale of the challenge that families, public services and the wider economy are still facing as a result of the pandemic.
“The fact remains that there are clear gaps in funding where the Ƶ Government should be investing in Wales and it has chosen not to. Arrangements for replacing EU Structural Funds remain unclear, but what we do know is it falls well short of the £375m we were receiving – these are funds that support skills, businesses and decarbonisation
". HS2 (English rail project) is expected to have a negative impact of £150m per year on the Welsh economy, while the failure to back a long-term solution for Wales’ coal tips could create an additional financial pressure of at least £60m per year.
“The limited measures announced by the Chancellor to help households grappling with the increase in the cost of living don’t go nearly far enough. Further steps should be taken to target support to lower income families struggling as a result of the cut to Universal Credit, the future increase in National Insurance contributions, and spiralling energy prices.”
