Wales is facing an entrepreneurial crisis and almost no-one is talking about it.
New data from the Office for National Statistics should be ringing alarm bells across Cardiff Bay, local authorities, our universities and every organisation that claims to champion business growth.
Between 2021 and 2023, the number of new businesses created across Wales fell by almost 25%, which is nearly double the Ƶ average decline of 13% and means that thousands of ideas that could have become employers, innovators and taxpayers never even got off the ground.
This poses an uncomfortable question for those in government and the agencies tasked with supporting entrepreneurs.
Where are the Welsh Government, Business Wales and, most of all, the Development Bank of Wales in all of this? These organisations were created and are generously funded by the public purse to support entrepreneurial activity. Yet on their watch, start-up creation in Wales has fallen faster than anywhere else in the Ƶ outside Northern Ireland.
The decline is sharpest in the Cardiff Capital Region, the part of Wales that should be leading national recovery. Between 2021 and 2023, 2,225 fewer businesses were created here, a fall of almost 29%. This is not simply a statistical blip but a massive contraction in the entrepreneurial capacity of the area that contains our capital city, or biggest concentration of businesses and our leading university.
And it comes despite more than £1bn in City Deal investment that was meant to stimulate innovation, build capacity and attract the next generation of high-growth firms.
To fully understand the scale of the problem, it helps to translate these lost start-ups into economic terms.
Based on conservative benchmarks, the missing businesses in the Cardiff Capital Region alone represent more than £200m in lost turnover and nearly 6,000 jobs that never materialised. And when supply-chain and local spending effects are included, the total economic cost could be as high as £35m over the period. No government, city region or public agency can look at those numbers and pretend, as they have done for some time despite countless warnings, that everything is fine.
More worryingly, this is not an isolated phenomenon, and across Wales the pattern is similar with north Wales experiencing a 25% fall in new firms, Swansea Bay falling by 19% and only mid Wales managed a slight increase albeit from a very small base.
Everywhere in Wales, entrepreneurial activity is weakening and while it could be argued that rising costs, inflation, interest rates and lower consumer confidence have played their part, these pressures are not unique to Wales. While other Ƶ regions have faced the same economic headwinds, the Welsh decline is much steeper, which suggest a deeper, structural failure in the way we support start-ups and early-stage founders.
For too long, Wales has lacked a visible, credible and connected national strategy for entrepreneurship. Support is fragmented across different bodies, inconsistent between regions, and often difficult for founders to navigate. Business Wales remains helpful in parts but is not changing the needle on the dial and the Development Bank of Wales – which should be a catalyst for new venture creation – has ended up behaving more like a large, risk-averse finance house focused on property deals than an entrepreneurial engine.
The result is a system that is reactive rather than proactive, bureaucratic rather than dynamic and far better at managing money than mobilising talent.
If Wales is to reverse the decline in start-ups, it must focus on rebuilding the foundations of its entrepreneurial ecosystem. The first step is addressing the chronic shortage of early-stage finance as too many would-be founders struggle to access even modest sums to test ideas, build prototypes or get to market. Funding needs to be quicker, simpler and more accessible.
Alongside this, Wales needs a genuinely connected national support system namely a single, visible “front door” for entrepreneurs that links Business Wales, universities, FE colleges, local authorities, incubators, accelerators and the Development Bank. At present, support is scattered and confusing and we need clarity, consistency and coordination.
We must also reduce the personal risk involved in starting a business. Wales should introduce small grants for young founders, people leaving education, and those in areas of high deprivation as making entrepreneurship financially feasible for more people is essential if we want activity to increase again.
A further weakness is the lack of a strategic focus on entrepreneurship in regional economic policy. Start-up creation should be a core performance indicator in every City and Growth Deal, with funding linked to measurable outcomes. Too often, large public investments are not tied to results, and entrepreneurship becomes an afterthought rather than a driver of growth.
One of the most important long-term changes Wales needs is a national commitment to enterprise education as in other small nations such as Scotland, Denmark and Estonia, all of which have shown how transformational this can be. If we want more people to start businesses, we must build entrepreneurial confidence and skills long before adulthood and enterprise should be embedded in every school, college and university with all connected to local businesses, mentors and role models.
And finally, Wales should establish a national network of enterprise hubs – one in every town in the nation – to make entrepreneurship visible, local and accessible. These hubs could be created quickly by repurposing empty retail units, libraries or community buildings, providing co-working space, mentoring, training, finance clinics and enterprise education. They would serve as tangible community-level anchors for entrepreneurship, bringing support to the people who need it most.
Despite these depressing start-up statistics, I remain convinced Wales can turn this around as we have the ambition, the creativity and the talent. But unless we act now, we risk allowing entrepreneurial activity in Wales to drift into long-term decline and if the nation truly wants economic growth, then we must stop managing decline and create a strategy that focuses on driving innovation.
