Each year the British Business Bank publishes its Nations and Regions Tracker, a comprehensive survey of how smaller firms across the º£½ÇÊÓƵ are accessing finance.
Unfortunately, the 2025 edition reveals that at a time when investment is vital for growth, innovation and productivity, Welsh businesses are falling behind their counterparts in most other parts of the º£½ÇÊÓƵ.
The report shows a Welsh economy that is struggling to connect entrepreneurs to the finance they need with a 7% decline in the proportion of º£½ÇÊÓƵ small firms accessing external finance - one of the largest drops recorded anywhere in the º£½ÇÊÓƵ alongside North East England and East Midlands.
Whilst demand for loans and overdrafts rebounded in 2024 as interest rates eased and banks became more willing to lend, the value of debt finance actually contracted in real terms in Wales. And if businesses cannot get access to working capital that allows a business to invest in staff, equipment or new market, then the likely outcome is slower expansion, weaker productivity and fewer opportunities to scale.
The equity picture is also mixed and whilst deal volumes in Wales are moving in the right direction rising by just over 7% in 2024, the total value of equity raised in Wales fell by 12.1% to £113m. This suggests that valuations for Welsh firms are falling which typically means investors taking larger stakes for the same money. Indeed, the average Welsh equity deal is less than one-third the size of the º£½ÇÊÓƵ average.
In other words, Welsh entrepreneurs are giving away more equity to access less capital suggesting an ecosystem that is struggling to generate competitive pressure among investors with founders forced to give away too much ownership too early, reducing incentives and long-term wealth creation. Contrast this with the North West of England, where both deal volumes and values rose significantly with investment up by more than 46%.
Perhaps most telling of all is sentiment as the tracker shows that two-thirds said they saw more threats than opportunities in 2024 which is far higher than the º£½ÇÊÓƵ average. This matters because entrepreneurs who see only risk are unlikely to take on new finance, hire staff or launch new products which can then lock a regional economy into a cycle of underinvestment and low growth.
All of this together indicates a troubling pattern where Welsh businesses are using less finance, raising smaller sums of equity at lower valuations, borrowing less from banks, and feeling more negative about the future than their counterparts elsewhere in the º£½ÇÊÓƵ.
And that raises an uncomfortable question namely why is this happening when Wales has its own dedicated development bank, something that no other º£½ÇÊÓƵ nation or region enjoys?
The Development Bank of Wales (DBW) was set up to be a game-changer, addressing the long-standing complaint that Welsh businesses struggled to access the finance available in the rest of the º£½ÇÊÓƵ. Yet the evidence from this report suggests that simply isn’t happening and if the existence of DBW has not prevented finance usage from falling, valuations from slipping, and lending from contracting, then serious questions need to be asked about whether it is truly delivering on its mission.
There may be several explanations with some critics argue that DBW is too focused on easy wins such as management buy outs and property development, has failed to sufficiently support enough innovative start-ups and does not provide the follow-on funds critical to boost scale-up activity in the economy
Others point to a cautious, quasi-commercial investment culture carried over from its predecessor Finance Wales that makes it behave more like a risk-averse lender than a proactive development institution.
It may also be that DBW’s products are not well aligned with what ambitious, fast-growth firms actually need and if entrepreneurs perceive the terms on offer as too restrictive or the process as too slow, they will look elsewhere and given the dearth of availability in Wales, fail to find an alternative.
This is enormously disappointing and as I said twelve years ago when I first proposed the creation of a Development Bank for Wales to the then Minister for the Economy, we should be leading the way not lagging behind the rest of the º£½ÇÊÓƵ.
With a dedicated finance provider with hundreds of millions of pounds of taxpayers funding at its disposal, we should expect to see higher finance usage, more ambitious lending, stronger equity values and rising company valuations. Instead, we have the opposite which risks eroding found.
The results of this report should be a wake-up call for both the Welsh Government and DBW’s leadership and if we are serious about building an entrepreneurial nation, then we cannot afford to let our businesses drift further behind. That means a transparent and independent review of DBW’s performance, an honest debate about its strategy, and perhaps most importantly, a willingness to ask whether it is truly serving the entrepreneurs it was created for.
With the Senedd election just nine months away, the question is whether any of Wales’s political parties are prepared to grasp this challenge and rethink how finance is delivered to small and growing firms to boost the economy or will we head into another political cycle where the existence of a development bank is treated as a solution in itself rather than scrutinised for whether it is genuinely delivering impact?
If no party is willing to address these structural issues, then Wales risks another five years of missed opportunities where entrepreneurs are left with too little capital to truly scale their ambitions.
And if Wales cannot make a success of having its own development bank for small businesses, then the opportunity cost will continue to be felt by the entire Welsh economy for years to come.
