Moving Beyond Simplistic Narratives on Welsh Business Finance
It is fundamentally misguided to portray Welsh enterprises as excessively cautious when confronting growth finance opportunities. Our limited public resources achieve maximum impact when strategically deployed in partnership with private capital, addressing the dynamic demands of the modern economy. This nuanced perspective comes from Giles Thorley, Chief Executive of the Development Bank of Wales.
The Complex Reality Behind "Access to Finance"
Public discourse often reduces "access to finance" to a disarmingly simple equation: banks should increase lending, and government should fill any remaining gaps. However, this focus solely on supply-side solutions neglects the significantly more substantial issue of demand. A multitude of factors—including business confidence, prevailing economic conditions, the suitability of financial products, geographic location, and various incentives—collectively either enable investment or subtly discourage it.
Insights from the Latest SME Finance Report
The recent Wales SME Access to Finance report, published by the British Business Bank with support from Economic Intelligence Wales, captures this essential complexity. The findings present a mixed picture. On a positive note, approximately eighty percent of Welsh SMEs report currently positive cash flow. Yet, persistent challenges remain stark: Wales exhibits the highest proportion of SMEs reporting barriers to finance at 19%, coupled with the lowest share anticipating a need for finance in the coming year at just 17%.
If the goal is to foster greater innovation, investment, and economic expansion, these friction points must be treated as the central work programme, not merely as footnotes to a stable but stagnant status quo.
The Weight of the Economic Backdrop
The broader economic context is critically important. Following the initial inflation shock, price pressures have moderated but not disappeared. UK Consumer Price Index inflation stood at 3.4% in December 2025, remaining above the 2% target and at a level sufficient to encourage caution among many business owners considering borrowing. Although the Bank of England reduced the base rate to 3.75% in December, with forecasts suggesting gradual further easing throughout 2026, insolvency figures continue to be elevated by historical standards.
This environment does not signal a crisis, but it equally does not foster exuberance. For businesses operating on tight margins, a "wait and see" approach can understandably feel like the most prudent and intelligent strategy.
Key Data-Driven Findings
The report reveals several critical trends. Firstly, barriers to finance are enduring. One in five Welsh SMEs encounters obstacles when seeking funding—a higher rate than in Scotland or Northern Ireland—with issues spanning ability to repay, awareness of options, and process complexity.
Secondly, confidence levels are not uniform across the nation. In South West Wales, only 45% of respondents planning to raise finance feel confident about securing it, compared to a Welsh average of 62%.
Thirdly, there is a noticeable skew towards short-term financing products. Heavy reliance on business and personal credit cards, alongside residual Covid-era loans, is not inherently wrong but can prove expensive and suboptimal for funding long-term growth investments.
While the report indicates "0% equity usage" in North Wales, such granular percentages from small sample sizes can be misleading. Equity is indeed being deployed in the region; the Development Bank of Wales alone has completed 54 equity transactions there. Encouragingly, 10% of survey respondents state they plan to raise equity, signalling growing recognition of the value of patient capital.
The Evolving Banking Relationship
Recent analysis from Economic Intelligence Wales on technology's role in banking provides further context. It highlights that over half of businesses remain with the same bank for more than two decades, with 84% using one of the four largest high-street banks. While 59% communicate with their bank at least every six months, a mere 1% of these interactions occur face-to-face. When key decision-makers feel distant and processes seem opaque, business confidence inevitably suffers.
The imperative is to guide more businesses towards finance and funders that are appropriately matched to their needs: asset finance for equipment, working capital tools for seasonal fluctuations, and equity for scaling innovative ventures.
The Strategic Role of the Development Bank of Wales
The Development Bank of Wales operates to address areas where commercial markets under-deliver. Since its inception in 2017, it has invested over £1 billion across Wales, supporting 4,700 businesses. This is a significant achievement, but the institution represents just one small component within a much larger financial ecosystem. Its purpose is to work alongside private capital, not to replace it.
As traditional relationship banking has receded and decision-making has centralised, the local "credit conversation" has become harder to initiate. This erosion affects confidence and the ability to navigate finance options, particularly for smaller firms.
A Practical, Place-Based Approach
The Bank's practical strategy is fundamentally rooted in place. Its teams are based within communities across Wales, ensuring the initial conversation happens locally and on the customer's terms. This is supported by a dedicated learning hub that helps time-pressed owners navigate the finance landscape in straightforward language, and a 'founder playbook' focused on effective equity use at early stages.
Close collaboration with Business Wales aims to create a seamless support system—one ecosystem with multiple entry points. Furthermore, the Bank is actively seeking to work with other public finance institutions to align products, co-fund where sensible, and eliminate duplication. The objective is clear: provide clearer guidance, faster routes to appropriate capital, and a joined-up ecosystem centred on Welsh businesses.
Building a Collaborative Ecosystem
Banks and brokers are encouraged to partner on navigation. If a business is better suited to a Development Bank product, a referral for co-funding should be made, and vice-versa. The goal is to minimise dead ends and accelerate access to "right fit" financing.
Universities and technology hubs play a vital role in feeding the pipeline across innovation-led clusters, helping to replicate readiness beyond the M4 corridor. While spinouts are a strength, the surrounding capital infrastructure must be equally robust.
Where mandates permit, institutional investors can assist in building structures that channel more patient capital into Welsh productivity assets, without compromising on disciplined risk and return parameters.
Stability Versus Complacency
Labelling Welsh SMEs as "too cautious" is an easy caricature. Many businesses are exercising sensible prudence following a challenging period. The task is not to criticise this prudence but to systematically reduce friction so that when founders identify a credible growth opportunity, the path to funding is short, clear, and proportionate.
This defines the role of a development bank in 2026: fixing navigation, reducing effort, broadening options, and crowding in scale. By executing this consistently, locally, and transparently with partners, Wales can better convert its inherent resilience into tangible growth.
The nation possesses enormous creative and industrial potential. The report underscores that the friction founders experience extends beyond interest rates to encompass navigation, confidence, and product fit. Eight years of sustained investment growth demonstrate the model's effectiveness, but the 2026 economy is materially different from that of 2017.
As needs evolve alongside economic conditions and funders' risk appetite, finite public funds are most effectively deployed in concert with private capital. This partnership is essential to meet evolving demand and multiply overall impact. Wales has proven exceptionally adept at resilience. The next critical step is to become equally proficient at confidently, patiently, and ambitiously backing its own potential.
