Described by the First Minister as “the jewel in the crown of Welsh Government”, the Development Bank of Wales has spent the past week celebrating the milestone of £1bn invested since its creation in 2017.
It is an impressive figure at first glance and the scale of the organisation’s activity - thousands of loans, hundreds of businesses supported in every corner of Wales, and tens of thousands of jobs reportedly created or safeguarded - has been held up as evidence of a vibrant and ambitious Welsh economy with its new chair claiming that its distinctive model is “helping entrepreneurs who want to start up, scale up and adopt new technologies, fuelling vital job creation across Wales.”
But if we look beyond the hubris and glossy press articles to subject the numbers to the scrutiny that any publicly funded institution should welcome, a very different picture emerges and what becomes clear is that while the development and is extremely active, it is not building the growing economy Wales needs.
The simplest way to understand the problem is to break down the £1bn that has been deployed. Spread across more than 5,000 investments, the average transaction comes in at just under £200,000 which is the behaviour of a cautious high street bank lender not an economic development institution charged with transforming the Welsh economy.
This approach may help individual businesses with short-term challenges but as this column has said so many times, Wales’ prosperity will ultimately depend on high-growth firms capable of commercialising ideas, scaling globally and delivering productivity gains that small, incremental lending simply cannot produce.
Nowhere is this structural weakness clearer than in the development bank’s support for new businesses having funded 787 start-ups since its launch. Yet with Wales producing more than 20,000 new business registrations every single year, backing fewer than 100 start-ups annually means the development bank reaches less than half of 1% of all new founders (or less than five new businesses per local authority every year).
For a nation that desperately needs a stronger entrepreneurial pipeline, this is totally unacceptable and we cannot expect to build a generation of high-growth Welsh companies if the Development Bank is interacting with so few of the people who create them.
The picture is no stronger when it comes to technology and innovation and the bank highlights support for 292 tech ventures backed with £89m of its own money and points to a further £196m of co-investment. This sounds impressive until one examines what they mean in practice i.e across eight years, this equates to a little over £300,000 of development bank funding per company or just under £1 million when co-investment is included.
Compare this to what you see in the Ƶ’s major innovation hubs where even seed rounds often exceed £1m and a typical Series A investment can run into the £3m to £10m range. Indeed, the fact that only £8.2m went to early-stage tech ventures in 2024/25 - a sum that would barely fund a single modest seed round in London, Cambridge or Manchester - shows that capital is not being deployed at a level remotely comparable to the conditions necessary to build genuine scale-up firms.
A healthy scale-up ecosystem produces frequent and meaningful exits that recycle capital, attract talent and signals to private investors that a region is producing genuine growth opportunities. Given this, the most revealing statistic is the number of exits that the bank boasts which amount to just 30 from a portfolio of 252 equity-backed businesses.
For an institution with an explicit mandate to grow high-value businesses, this is an astonishingly low outcome especially as exits indicate whether high-growth firms are emerging, whether follow-on funding is happening and whether value is being created through innovation.
Given that venture investing requires specialist expertise, real risk appetite and the ability to back winners with significant capital, the poor performance from the development bank suggests that it may better to outsource this function to professional venture capitalists who would almost certainly deliver better results.
Another one of the most repeated messages from the bank is that it “fills the gaps left by commercial lenders” yet its own data suggests that it is replicating the behaviour of high street providers rather than the kind of transformational, risk-taking institution that Wales urgently requires to move up the economic value chain.
Yes, these are vitally important for local communities but many of the smaller deals could be done by an effective and efficient body similar to MicroLoans Ireland which does this job far better than we see here in Wales. In fact, the Irish organisation has given out twice as many microloans last year and all with only 19 staff as compared to over 280 employees for the development bank.
None of this is to diminish those businesses that have been helped by its interventions as any additional funding should be welcomed but the issue is not intent or effort, it is strategy and institutional culture. Wales needs a development bank that is prepared to take bigger risks, make fewer but larger strategic investments and back far more founders at the very beginning of their journeys.
Therefore, it is clear to anyone that the future success of the Welsh economy will not be built on the back of small, low-risk loans, funding property developments and succession deals which other existing finance providers can already supply.
And as I said eleven years ago when I first proposed the creation of a Development Bank for Wales, the nation needs an institution that matches the ambition of its entrepreneurs and until that happens, we will continue to have meaningless public relations exercises to big up the development bank rather than a focus on supporting the ambitions of those high-growth companies we need for the economy of tomorrow.
