We must not overlook the importance of established SMEs to the Welsh economy. Established SMEs should no longer be treated as the overlooked middle of the economy.
The Forgotten Middle of the Economy
For years, the debate about economic growth in Wales has tended to swing between two extremes. On one side is the long-standing ambition to attract major inward investors, promising large-scale employment and transformational investment, whilst on the other is the growing interest in start-ups, university spinouts and high-growth technology firms, all of which are important parts of any modern economy. Yet between these two sits a group of businesses that rarely receives the attention it deserves, despite being central to the day-to-day reality of the Welsh economy: namely, established small and medium-sized enterprises.
A new report by Oxford Economics for Allica Bank makes this point powerfully by focusing on established SMEs, defined as businesses employing between five and 249 people. It shows that while they represent only a minority of the overall SME population, they account for more than half of SME employment and nearly three-quarters of SME turnover.
Key Role in Welsh Private Sector Employment
In simple terms, these are the firms that do much of the heavy lifting in the small business economy. They are not the very smallest microbusinesses, nor large corporates, but they are often the companies that provide stable employment, invest locally, support supply chains, and anchor economic activity in towns, cities, and rural communities. For Wales, the findings are particularly significant. The report shows that established SMEs account for 44% of private sector employment in Wales, compared with a UK average of 35%. Only Northern Ireland has a higher dependence on this group of firms. That should be a wake-up call for policymakers, because it suggests that the Welsh economy is more reliant than most parts of the UK on businesses that are already trading, already employing and already embedded in their local communities.
This is not an argument against start-up support or inward investment, as Wales needs both. But if almost half of private sector employment in Wales is tied to established SMEs, then any credible economic strategy has to put their growth, productivity and investment needs at the centre of policy. Too often, these businesses fall between the cracks: they are too mature to be seen as exciting start-ups, too small to be treated as strategic anchors, and too dispersed to form the kind of single-sector cluster that attracts ministerial attention. Yet collectively, they are one of the most important engines of the Welsh economy.
Access to Finance: A Critical Gap
The report also highlights the importance of access to finance, with Allica Bank estimating a structural SME lending gap of £65bn across the UK relative to historic trends, which equates, all things being equal, to a gap of around £2.6bn in Wales. That matters because finance is not simply about keeping businesses afloat but about enabling them to invest in new machinery, premises, vehicles, technology, stock, people and export capacity. When established SMEs cannot access the right finance on the right terms, their growth is delayed, their productivity suffers and their ability to compete is weakened.
This is especially relevant to Wales, where the productivity gap has persisted for decades, and many businesses operate in sectors and places that are not well served by venture capital or equity finance. The report notes that SME finance remains overwhelmingly dependent on bank lending rather than equity, with UK SME bank lending standing at £68 billion in 2025 compared with £9 billion in equity finance. It also notes that equity finance is heavily concentrated, with AI companies and London-based SMEs taking a disproportionate share. Therefore, for most Welsh established SMEs, the key issue is not whether they can raise venture capital, but whether they can secure practical lending that allows them to grow.
Regional Impact of Lending
That is why the regional findings in the report are so important. Allica Bank’s lending supported an estimated £8.4bn contribution to UK GDP, 118,000 jobs and £2.1bn in tax revenues in 2025. But the more interesting point is where that impact was felt. The report shows that Allica Bank’s enabled GDP contribution was equivalent to 0.63% of the Welsh economy, almost double the UK-wide figure of 0.33%. It also estimates that, as a proportion of regional employment, the largest jobs impact was in Wales, indicating that when lending reaches established SMEs in places like Wales, the relative impact can be greater than in larger, more financially saturated economies.
Implications for Policy and Business
We know that Wales needs more businesses, but it also needs more of its existing firms with five, ten, twenty or fifty employees to become more productive, more export-oriented and more confident in investing. It needs family firms, manufacturers, construction businesses, wholesalers, professional services firms, tourism businesses and local employers to have access to the finance and support that allows them to move to the next stage. This also has implications for public policy. Business support in Wales should not be designed only around early-stage entrepreneurship or large inward investment projects. It should include a serious, targeted programme for established SMEs with growth potential, linking finance, management capability, innovation support, procurement opportunities and export advice. In other words, there should be a much stronger focus on helping these firms adopt technology, improve productivity, develop leadership capacity and access the capital they need to expand.
For business leaders, the message is equally important. The firms most likely to benefit from finance are those that can show a clear plan for growth, a strong understanding of their numbers and a credible case for how investment will generate returns. In fact, being finance-ready is now a strategic necessity, not an administrative exercise.
Conclusion: A Route to Growth
For Wales, the wider conclusion is that established SMEs should no longer be treated as the overlooked middle of the economy. They are not marginal but are central to employment, resilience and local prosperity. If Wales is serious about closing its productivity gap and building a stronger private sector, then backing established SMEs is one of the most important routes to growth.
