Cultivating Small Business Growth: The Future of Business Support in Wales
Dr Llyr ap Gareth Felix Milbank May 2025
Joanne Roberts Fabulous Welshcakes
Acknowledgements
This report was authored by Dr Llyr ap Gareth and Felix Milbank. The authors would like to thank all interviewees who kindly gave their time to support this report. The role of the Welsh team has been crucial. Thanks to Mike Learmond, Rob Basini, Shona Holmes-Berry and Lauren Rose in the vital support without whom much of the research could not take place. Thanks to Ben Cottam and Fflur Elin for their feedback and support and important engagement to help shape the final report. The UK policy team supported us in providing a wider view and comments – gratitude in particular to Iliana Pearce and Ben Butler for your generous engagement with the report. Finally, thanks to FSB Wales’ Policy Unit for the input and support.
Gratitude to all the above for the important input – any remaining mistakes are ours as authors.
Executive Summary
“Without effort, you cannot be prosperous. Though the land be good, you cannot have an abundant crop without cultivation.”
Plato
Wales is an entrepreneurial nation with small and medium businesses the lifeblood of our economy.
Access to effective business support can play a crucial role in empowering individuals to start and scale their businesses, generating prosperity across the nation. By providing essential guidance on regulations and finances, and facilitating access to vital mentorship, training, and funding opportunities, business support can be a key driver for growth, innovation, and operational efficiency within the Welsh SME landscape. Cultivating SME growth is key to future success, and we can develop the tools we have in Wales to do so.
Business support in Wales has developed a system towards a ‘one stop shop’. Business Wales was established in 2011 to deliver this approach by offering independent and free advice to entrepreneurs and businesses nationwide. While the reality involves a more diverse landscape of support providers, including sector-specific initiatives like Farming Connect, Creative Wales and Industry Wales, UK-wide organisations and more localised networks, Wales has notably succeeded in establishing Business Wales as a prominent umbrella brand and the primary initial point of contact, a development that distinguishes it from other regions across the UK.
The other key institution is the Development Bank of Wales, launched in 2017 as a successor to Finance Wales, which provides independent support aiming to help Welsh SMEs start up, strengthen, and grow by providing sustainable, effective finance options.
Since the establishment of Business Wales, the funding landscape has changed beyond recognition due to the UK leaving the European Union. While the Development Bank of Wales has been increasingly capitalised to address access to finance issues, the amount of funding for Business Wales has fallen by more than a quarter over this period due to a loss of EU funds. As such, it has had to do more with less.
Having sought to understand the effectiveness of business support in fostering an ‘entrepreneurial ecosystem’ in Wales, identify areas for improvement,
and consider its future direction, the central finding of this report is that Wales’s business support ecosystem represents a significant strategic and competitive advantage. Notably, the high brand recognition of business support institutions within Wales provides a considerable strategic advantage for shaping and implementing future policy. To ensure Wales is able to fully leverage the benefits of this system, this report argues that funding levels should be returned, in real terms, to those in place before the UK left the EU.
Our research has also highlighted clear areas for improvement in the delivery of business support across various institutions, notably the need for strengthened oversight and scrutiny. To address this, we propose the establishment by Welsh Government of a Business Growth Board. The purpose would be to convene stakeholders from across the business support landscape, including service users, to assess delivery against key performance targets, to understand the effectiveness of outreach to groups traditionally underrepresented in business support, and to ensure that services remain dynamic and responsive to evolving future needs.
Analysis of the business support process in Wales has also revealed key opportunities for improvement centred around the user journey. Businesses would benefit from enhanced contact and engagement, more prompt responses, and a reduction in unnecessary bureaucracy. To address these issues and create a more seamless experience, the implementation of a comprehensive, user-centric digitalisation strategy is crucial. Importantly, evidence indicates that SMEs highly value personal contact, necessitating a balanced approach that views digital and face-to-face engagement as complementary strategies, ensuring a diverse and effective support system.
Our research also highlighted effective partnerships emerging between Business Wales and localised intermediaries, including business groups deeply embedded within communities, although there remains room to develop these relationships to be more effective. These local entities potentially benefit from greater trust, enabling more direct engagement with businesses and a tailored response to local market needs. However, the success of this model relies on the existence of strong local forums, hubs, and networks. This is consistent with the findings of our recent reports
1 In 2023 alone, there were a record 20,675 start-ups launched, representing a 13.8% increase on 2022 - Insider Media (2024) ‘Wales experiences 2023 start-up boom: R3’, Insider Media, 23 January. Available at: https://www.insidermedia.com/news/wales/wales-experiences-2023-start-up-boom-r3
on Skills2, Manufacturing3 and the Creative Industries4 , which highlighted the value and new opportunities created by such structures. We therefore recommend the delivery of a local business network development strategy. Driven by local authorities with designated responsibility, this approach would complement national business support, ensuring its impact and accessibility at a local level. Toiling the soil so that initiatives land on fertile ground, as it were.
Feedback from businesses accessing support indicated that while uptake was limited, those utilising private business consultants greatly benefitted from their expertise. This suggests that increasing access to, and improving the promotion of, such tailored interventions could provide significant value to businesses. We therefore recommend that the Welsh Government collaborate with Business Wales to implement a voucher system enabling SMEs to access specialised business support from the private market. We view this as a valuable complement to the existing support framework, and a guard against displacing private sector support provision.
The business support system does not operate in isolation and must be considered as part of the wider governance and decision-making landscape impacting businesses, including proposals for a replacement Shared Prosperity Fund, the UK Government’s Industrial
and Small Business strategies and proposals for a UK ‘business support service’. Business Wales and the Development Bank of Wales as known go-to support in Wales should be key partners in shaping UK policies and implementing them to fit the local market needs in Wales and it is incumbent on the UK Government and the Welsh Government to work together effectively to ensure delivery of coordinated and clear economic strategies that works at the localised level for businesses accessing support.
Strategically, Wales’s business support ‘one-stop shop’ is a crucial asset in delivering both the UK and Welsh Governments’ ambitions for economic growth. By effectively empowering businesses to access and leverage external expertise and resources, this ecosystem directly supports small businesses to overcome operational constraints, adapt swiftly to evolving market demands, and ultimately achieve greater long-term sustainability. In developing a holistic approach to business support across areas from skills to net zero to high streets, from supporting large projects to small public contracts, we can support an economic development strategy that helps grow businesses and opportunities across all our communities. In cultivating SMEs, we prepare the ground for future Welsh economic success from the grassroots.
2 L ap Gareth, E Crawley, K Marshal, B Wilmott, A Skills-Led Economy for Wales (FSB:2024), available at https://www.fsb.org.uk/resources/policy-reports/a-skillsled-economy-for-wales-MCFTTCO2J6WJBAPIBPWIK37I7VNM
3 D Pickernell ‘Manufacturing Momentum’ (FSB / Swansea University: 2023), available at https://www.fsb.org.uk/resources/policy-reports/manufacturingmomentum-MCQY4X3AG7KZFWJIJHMTSVBYZSSM
4 L ap Gareth ‘The Power of Creativity’ (FSB: 2024), available at https://www.fsb.org.uk/resources/policy-reports/the-power-of-creativityMCHA4NHOFOLFH3NNQRS5BE6XOCVA
Key Recommendations
This section provides the report’s key recommendations. More detailed recommendations are included in the main body of the report.
The Welsh Government should:
• Restore funding levels for business support in Wales in real terms to those in place before leaving the EU, and commit to multi-year budgets.
• Commit to a widespread mapping and review of business support in Wales, ensuring alignment to future needs of the economy.
• Develop a voucher system to encourage smaller businesses to access private sector business support.
• Place the Development Bank of Wales on a statutory footing to provide certainty and stability for the long term.
• Establish a Business Growth Board to convene stakeholders from across the business support landscape, including service users, to assess delivery against key performance targets, to understand the effectiveness of outreach to groups traditionally underrepresented in business support, and to ensure that services remain dynamic and responsive to evolving future needs.
• Direct additional resource at a targeted account management function which would provide specialised and intensive support – such as tailored mentorship, access to growth finance, and innovation and technology adaptation support – to SMEs with a clear ambition and potential to scale up their business in order to address Wales’s ‘missing middle’.
• Use the restoration of decision-making on EU replacement funds to implement a comprehensive economic strategy, delivered in partnership with local governments and Corporate Joint Committees, and underpinned by recommendations put forward by the OECD in their Regional Governance and Public Investment in Wales Report.
The UK Government should:
• Use what already works. Recognise the strength of Business Wales’s brand and knowhow when shaping new policies, including the delivery of the Small Business Strategy and industrial strategy, and use these existing mechanisms to deliver towards their economic aims.
• Ensure any new UK level ‘Business Growth Service’ to support SMEs does not duplicate, displace or dilute the Business Wales brand and work in Wales, but supports it.
• Set a target that half of all direct Government BERD (Business Enterprise Expenditure on R&D funding) should be directed to SMEs, and implement a strategy to ensure Wales’s proportion of R&D funding at least reflects its population share.
Business Wales should:
• Improve the user journey by increasing face-toface engagement, setting targets for how quickly queries receive a response and implementing a ‘case officer’ approach with a named point of contact for substantive support.
• Implement a digitalisation strategy focused on speeding up the interface for support, reducing bureaucracy and ensuring quicker timescales and responses for businesses.
• Deliver a marketing strategy aimed at ensuring businesses are aware of the support they can access to address skills gaps within their workforce.
Local authorities should:
• Work with Business Wales to deliver local business network development strategies and identify and develop a list of named partners to facilitate referrals for business support, to complement Wales wide business support provision.
Chapter 1 Theoretical Frameworks
Theoretical Frameworks
Theoretical frameworks are important to understand how the different echelons of government interact with each other, including how policymakers and civil servants view firms and how interventions can best support them. These shape understanding of the type of support businesses need, what interventions lead to growth and economic development, and how to support a firm’s own aspirations of contributing towards the wider economy. It is the lens through which policy makers understand how firms act and change and to inform the decisions that will ultimately impact on businesses.
An overview of some of the different models is useful. This is not an exhaustive overview but rather looks to how the frameworks used have a material effect on how policies are shaped and implemented – and by whom –within business support in Wales.
This chapter looks at views of how individual firms operate (the micro level) and how the economic environment is shaped for success (macro level) as this pertains to the ways policy makers are working in Wales and the UK in this field.
Individual firm development (the bottom-up view)
Many firms would baulk at being placed into a typology of firms. Firms are unique, with diverse needs and pressures at various times, are disparate in terms of geography and sectors – in many ways, ideally, one would have as many means of business support as there are firms!
Realistically, it is necessary to develop frameworks that identify where interventions can most effectively support as many firms as possible, prioritising efficiency within government departments and align with wider policy aims, such as the development of an industrial strategy or transition to net zero. Consequently, while businesses’ support needs vary by size, type, and sector, they often encounter similar problems. As Harvard Business School suggests, the key is to identify these common challenges and organise them into a framework that enhances our understanding of the nature, characteristics, and problems of businesses, thereby enabling targeted and efficient support.
A clear starting point is to assert clearly and repeatedly with Harvard Business School that ‘A Small Business Is Not a Little Big Business.’5 As such, taking the ideal
type of business as large corporations and working back down from their pressures and needs is a category error. This approach fundamentally misunderstands the specific needs of SMEs and, crucially, limits their potential for growth. If we mistakenly start from that notion – as can sometimes be the case in generic business support programmes – we will not be able to get the most from our SMEs in Wales. Any framework must account for difference accordingly:
“…the framework aids… in diagnosing problems and matching solutions to smaller enterprises. The problems of a sixmonth-old, 20-person business are rarely addressed by advice based on a 30-yearold, 100-person manufacturing company. For the former, cash-flow planning is paramount; for the latter, strategic planning and budgeting to achieve coordination and operating control are most important.”6
To effectively support SME growth, a framework should align support with the distinct stages of business development. These stages are often categorised according to growth:
5 J A Welsh & J F White, ‘A Small Business Is Not a Little Big Business’ (Harvard Business Review: 1981), available at https://hbr.org/1981/07/a-small-business-isnot-a-little-big-business
6 N C Churchill & V L Lewis, ‘The Five Stages of Business Growth’ (Harvard Business Review: 1983)
For instance, in the early growth phase, businesses may require access to finance and advice on adapting workforce policies or securing new premises. As companies expand, support needs may shift to include advanced staff management techniques, new managerial strategies, and addressing resource and capital challenges related to scaling operations. Identifying and addressing these stage-specific needs ensures targeted and impactful support.
A further aim should be to ensure a sustainable growth model that prioritises good succession plans, ensuring local value is kept and embedded and that exit is not due to capital flight and takeovers. As such an SME focused strategy should look to maximise benefits to local economies.
It is important to avoid the common error of viewing business development as a series of inevitable stages, or creating a model that assumes growth is always ‘better’ for all firms. To counter the risk of equating scale with firm quality, the concept of ‘Small Giants: Companies Choosing to be Great instead of Big’ offers a valuable alternative. 8 This analysis examines case studies where businesses, having experienced rapid expansion, recognised the potential loss of their core values and subsequently prioritised their qualitative strengths over quantitative growth. A focus on cultivating ‘small giants’ also highlights the broader
contribution so many SMEs make to their communities, workforces, and in driving innovation. For instance, a firm might prioritise sustainable practices or invest heavily in employee training rather than high turnover.
Any framework must therefore be flexible enough to respond to the diversity of individual firms’ needs – some high growth and others looking to develop according to different ethos. The latter firms also develop or grow at their own pace or according to their own values and as embedded stable business in their communities, rather than a too strict interpretation of the above framework. Supporting these firms is also important to a diverse economy and to cultivating a sustainable ‘missing middle’ of growing and sustainable firms embedded across communities throughout Wales.
Entrepreneurial Ecosystem and a ‘mission approach’ (the top-down view)
The theoretical understanding of the ‘entrepreneurial ecosystem’ and its variants, is clearly highly influential among policy makers and current governmental policy, including ideas around a ‘mission economy’ that steers actors toward growth and economic development. These models shape the actions taken by policy makers and have shaped some of the questions we have asked of interviewees and our survey accordingly. 7 Graphic adapted from N C Churchill & V L Lewis, ‘The Five
Stages of Business Growth’ (Harvard Business Review: 1983)
B Burlingham, Small Giants: Companies Choosing to be Great instead of Big (Penguin: 2007)
The ecosystem approach emphasises the wider context and the role of institutions that support entrepreneurship and business success by providing the opportunities, the skills development and wider policy support to economic success, as well as a culture that champions entrepreneurs. These need to be steered towards common goals, but with different actors working to their strengths to build that economic ‘ecology,’ and what allows businesses to thrive.
The MIT model cited by many interviewees argues that there are five key stakeholders critical to the success of most efforts at innovation-driven entrepreneurship in the ecosystem:
another and expect it to work, as there are local strengths and institutional structures to account for. Therefore, this work aligns with the understanding of historically specific development and the concept of path dependency, emphasising the need for policy to consider existing regional industrial strengths and infrastructure. Path dependency is the idea that economic development is strongly influenced by historical events and decisions, creating “lock-in” effects where regions become dependent on specific industries or economic models. This can lead to both positive lock-in (e.g., Silicon Valley’s sustained growth in tech) and negative lock-in (e.g., declining industrial regions struggling to diversify).12 Understanding how historical economic trajectories influence regional development, how it can both enable and constrain future economic development, is crucial when designing effective business support frameworks. This view would emphasise the need for adaptive policies that consider regional histories, capabilities, and institutional structures rather than one-size-fits-all solutions.
International Case Study: Norway’s Competence Brokering Programme
Whilst opinions vary on where the weight of responsibility should be, in particular whether government should lead by driving the ‘mission economy’ (actively directing investment and innovation towards specific goals)10 or simply “set the table” (creating a favourable environment for businesses to thrive),11 MIT’s model emphasises that all identified stakeholders have a vital role to play in creating an ‘entrepreneurial ecosystem’. This model also acknowledges that some stakeholders take a more prominent role at different times and in different locations.
This framework shows that one cannot simply transplant a successful model from one area to
In Norway, regional innovation policy has been recognised as being essential to fulfil the country’s economic potential. This is exemplified by the 2004 Competence Brokering programme, introduced under the Norwegian Government’s VRI Programme (Programme for Regional R&D and Innovation). The Competence Brokering programme aimed to enhance innovation and knowledge transfer to SMEs by employing intermediaries to bridge knowledge gaps between businesses and research institutions. Medr, Wales’s tertiary education body could fill such a gap under its current remit.
A key achievement of Norway’s programme was improved SME access to research and policy resources through these brokers, who facilitated connections with research partners, provided targeted funding and advice, and tailored support to regional needs, thereby addressing local economic challenges and reducing knowledge disparities.13
9 P Budden & F Murray, ‘MIT’s Stakeholder Framework for Building & Accelerating Innovation ecosystems’ (MIT: 2019)
10 M Mazzucato, Mission Economy: A moonshot guide to changing capitalism (Allen Lane: 2021); The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Anthem: 2013)
11 J Lerner, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – And What to Do About It (Princeton University Press: 2012)
12 R Martin & P Sunley, ‘Path Dependence and Regional Economic Evolution’ in Journal of Economic Geography, Volume 6, Issue 4, August 2006
13 OECD (2017), OECD Reviews of Innovation Policy: Norway 2017, OECD Reviews of Innovation Policy, OECD Publishing, Paris, https://doi. org/10.1787/9789264277960-en.
MIT’s five stakeholders in an innovation ecosystem Entrepreneur
While the long-term impact on business innovation varied, the initiative successfully enhanced Norway’s regional innovation landscape by fostering connections, strengthening regional economies through data utilisation, and promoting collaboration. As such, it is important that if the entrepreneurial ecosystem is the foundation for strategic measures, that it sits on specific interventions that follow best practice as seen in Norway and as set out by the OECD.
Our interviews with firms suggest that although they feel disenfranchised with the government’s ability to
Summary
address their interests, they still have confidence in the systems and processes in place. Organisations like Business Wales and the Development Bank of Wales are viewed positively, with firms acknowledging their vital role as key pillars of the business support ecosystem in Wales and responding differently to these in the survey than the ‘day-to-day’ partisan politics or low trust in governments. The onus, therefore, is to ensure that economic policy develops and enhances these institutional advantages, and enhancement of business support is grounded in well-known and relatively trusted organisations seen as relatively separate and depoliticised. ‘Part of the furniture’ may seem a mundane aspiration, but in this case, this is a very real advantage and a foundation on which to build.
The theoretical framework provided the principles and questions that underpinned our research in surveys and interviews. The key points are:
• Business Support institutions form a key part of building an entrepreneurial ecosystem in Wales. It does not do so in isolation. Many different actors, institutions and policy agendas need to cohere and work together towards building a prosperous SME economy.
• It is important that business support is seen as part of a wider strategy to build the entrepreneurial ecosystem in Wales. Supporting the businesses that shape the economy while aligning to a coherent economic strategy that is market driven, is an important role and coherent and extensive business support is important to that wider goal. SMEs have different needs; a framework that looks at life cycle and models of development is therefore important to understand these different needs.
• It is important that we view the value of different businesses, and different types of businesses, and their different models of development based on their own values as Small Giants. It is not merely growing to be bigger businesses by size, but embedded strong businesses, and the support needs to account for these different needs.
Chapter 2 What Firms told us
“I can only build my business by having good people around me and I want one of those to be the government. One of those is the FSB, one is the accountant, the HR department, the finance, legal services, software. But I feel that there needs to be government in there…they need to be in the conversation.” Transport company, North Wales
From October 2024 to February 2025, FSB Wales conducted a survey on business support, conducted interviews with 9 firms across different sectors, and conducted a roundtable with FSB members to canvass views on business support. The focus in outreach was to target those with experience of the business support system.
This chapter outlines the key findings of the quantitative and qualitative research and what they told us. The following chapter looks at interviews with institutions and providers, and places the issues raised into a wider framework and analysis.
Growth Aspirations
To understand the growth aspirations of businesses accessing support, we asked about their goals, yielding these results:
Q1. What are the growth aspirations for your business over the next 12 months?
1. To grow rapidly in terms of turnover/ sales (more than 20% per annum)
2. To grow moderately (up to 20% per annum) 42%
3. To remain about the same size
4. To downsize/consolidate the business
5. Close business
Two thirds of respondents were looking to grow their business, with only 9% considering downsizing or closure, which underscores the significant potential of SMEs to be key drivers in achieving the Welsh Government’s growth aspirations, clearly demonstrating why providing access to targeted support and removing policy barriers is so crucial.
Our interviews highlighted the difference business support can make:
been brilliant through peer support from a great cohort of businesses at a similar stage, and also for helping us hone our pitch and 5-word summary of what we do, which was brilliant for driving our website message.”
As growth will mean different things to different businesses, we asked how they wanted their businesses to grow and develop:
Q2. How would you most like your business to develop over the next 2 years? (please choose up to 3)
Answer Choices
more productive (i.e. produce more goods or more services)
This demonstrates that by providing appropriate support, SMEs can be empowered to deliver on both the UK and Welsh Governments’ wider strategic economic ambitions for boosting productivity, the development of new markets, and innovation. Answer Choices
“Actually, very good, and we successfully launched our new start up. The FSB was excellent in provision of so many policy templates from its excellent website. The NatWest Accelerator Programme has
The top 3 areas businesses want to develop were:
• Become more productive (i.e. produce more goods or more services)
• Develop new products and/or services
• Become more innovative
FSB’s previous work on the missing middle agenda14 identified succession planning as a weakness across the Welsh economy. It is therefore interesting to note that in this survey, 28% noted that ‘Developing a succession plan’ is a priority over the next two years. This was also reflected in discussions with the accountancy profession, suggesting that an emphasis on this issue via business support institutions have yielded positive results. This highlights that where there is alignment between institutions, providers and government interventions, underpinned by clear policy aims, business support can effectively support and help steer SMEs. However, none of the businesses intending to close in the next year reported having developed a succession plan with the aid of business support, indicating that further is work is required to ensure that aspirations to develop succession plans are realised.
Business Support Institutions Accessed
We asked which support SMEs had accessed, as follows:
Q4. Have you sought business support from any of the following organisations? (please select all that apply)
14 FSB Wales, ‘Wales’ Missing Middle’ (FSB: 2017)
Accountants are the main source of business support, which is to be expected as a core service many SMEs will need to use. This reinforces the importance of intermediaries as a means to access and engage SMEs.
Significantly, Business Wales comes a close second to this key service. This indicates that its established brand, encompassing both local and national providers, has become a familiar and reliable resource – a key ‘part of the furniture’ for SMEs in Wales. This has likely been helped by having brand stability since its inception, following a period of frequent rebranding within Welsh business support services.
The effective delivery of business support relies on both public and private sector involvement, fostering a balanced “wrap around” approach that combines state support and intervention with clear signposting to a diverse range of providers, ultimately benefiting the business environment.
FSB are third for use – we must account for many having accessed the survey through our own networks, but it remains clear that FSB has significant reach and significant numbers of respondents who are members have accessed FSB services.
Following this, a notable proportion of businesses access support through informal networks of friends, family, and peers. This suggests that there is a significant opportunity to better leverage and develop these connections for formal business support. Furthermore, the true extent of advice obtained through these informal channels may be underestimated, as advice obtained through these avenues might not always be recognised or reported as formal business support.
Only 16.7% of respondents indicated that they had sought support from their local authority. This appears low given that a significant proportion of UK Government funding, including the Shared Prosperity and Levelling Up funds, have been administered via local authorities. This suggests a potential disconnect: either businesses are unaware of the role local authorities play in administering these funds, or they have not had opportunities to access them. Supporting this, our interviews revealed frustration among businesses regarding local authorities advertising support on websites that subsequently proved to be out of date. One comment noted that there was ‘very poor support or advice from [the] local authority’.
Around 10% of respondents had sought support from business consultants. This tracks with what we know about SMEs generally viewing this more costly advice as being most suitable for growth-orientated businesses –a similar subset likely to engage with the Development Bank of Wales or perceive such support as beneficial. To broaden access and impact, there may be merit in more effectively communicating the distinct advantages offered by both publicly funded and private sector support options. As explored later in the chapter, there may also be an opportunity for the Welsh Government to explore incentives like vouchers to enable small businesses to access consultant expertise.
The most concerning response regarding sources of business support was in relation to the education sector, with just over 8% indicating that they had sought support from further or higher education institutions. It is important to acknowledge that businesses may not always consider accessing skills through these institutions as accessing traditional ‘business support’. However, given that the education sector is a vital cog in building a successful entrepreneurial ecosystem, this low engagement suggests an underutilisation of the potential within Wales’s higher and further education institutions to drive economic growth, a finding consistent with our recent reports on both skills and manufacturing.15
The British Business Bank (BBB) score was extremely low but given that, with the exception of some start up funding across the UK, they do not generally fund businesses directly, this may account for some of this, as it is generally through other intermediaries that this engagement would take place. This suggests that the role of partners’ brand in implementing BBB contracts will be key to accessing firms and ensuring the success of any initiatives. The Development Bank of Wales and BBB have been working together effectively in Wales on the £130m Wales Investment Fund and areas of research and analysis around access to finance, for example. This relationship should continue and develop according to aligned priorities and workplans.
• With the Development Bank of Wales’s brand being far better recognised in Wales than that of the British Business Bank (BBB), BBB should ensure they both utilise the Welsh brands to support the impact of their work in Wales, and use such partnerships to reinforce and build the BBB brand alongside that of the Development Bank of Wales.
15 L ap Gareth, E Crawley, K Marshal, B Wilmott, A Skills-Led Economy for Wales (FSB:2024); D Pickernell ‘Manufacturing Momentum’ (FSB / Swansea University: 2023)
Assessment of Quality of Support and Engagement
The assessment of the quality of service from different providers was as follows:
Q5. And how would you rate the quality of the support and services you’ve used?
Bank
Local authority (County...
Business Wales
Business Angel Investor
Development Bank of Wales
British Business Bank
Accountant
Federation of Small Businesses
Enterprise Agencies or Hubs
Solicitor/Lawyer
Welsh Government
UK Government
Family or friends
Education institutions (e.g college)
Private Sector Business consultants
Peer Networks (i.e other businesses)
None of the above
(Insert text from other)
Support from friends, family, and peer networks is the most highly valued, with almost no negative perceptions, which is unsurprising given that these are pre-existing and trusted ongoing relationships. While informal, that these connections are powerful sources of social capital and can play a crucial role in fostering an entrepreneurial culture became clear through the interviews:
“I’ve got a list of people I’m going to for this kind of advice, where you know who are providing it out of their own good nature really rather than anything else.”
While the numbers are low, those who have accessed support through private business consultants and educational institutions also rate the quality of support, with the former scoring 0 (zero) negative perceptions. Although usage is low, this does point to the value of these avenues of support once businesses are using them, as explained by one of our interviewees:
“[On employment] I needed to go through all the legal HR things, which was anathema to me…I reached out and I came across a consultancy called the HR department…They took all that responsibility off me and just processed the induction, the health and safety, the terms of reference, the contracts, and I could focus on doing what I do, and the HR people did the rest.”
This indicates that more of these types of intervention and better marketing of the value of these offers or incentives to do so could provide value that is appreciated by businesses who then take them up. A way to ‘pump prime’ this market would be to have a system that allows businesses to draw down vouchers for funding to access support from registered providers, similar to vouchers schemes for export and for net-zero advice. This could be administered by Business Wales or the Development Bank of Wales as appropriate.
• The Welsh Government should develop a voucher system to encourage smaller businesses to access private sector business support.
Accountants and Solicitors similarly do well on quality –this reflects the fact that businesses who are unhappy with a service can find an alternative in the market, and they provide a core service that is appreciated.
72% of respondents were positive about FSB services, with 14% negative.
The institutions that get the most mixed to negative perception are private banks. Given what we understand about difficulties in accessing finance in Wales, this is unsurprising but remains significant. This continues to indicate a market failure for SMEs in Wales and so a continued need for support on access to finance and business advice from alternative sources, particularly during periods of difficult economic conditions when banks withdraw finance.
• The role of public finance institutions such as the Development Bank of Wales and the British Business Bank remain important as independent financial institutions with a mission to support SME finance and address market failure in SME finance in Wales. This role and focus on filling gaps in access to finance and in proving market viability to private banks and investors should continue and be protected for the long-term future.
Business Wales scores comparatively well, but with significant room for improvement. 58% viewed the support they have accessed positively, versus 22% seeing it in negative terms. Business Wales was used by one company we interviewed who found the support beneficial, but noted it could have been more useful as an earlier intervention:
“[For] skills in terms of digital marketing, social media… I used Business Wales a lot, particularly during lockdown for their webinars to access support for digital marketing…[they] offered, an analysis of our marketing, analysis and report of our website. It was all good, but I thought if you had that analysis at the start that would have told you what you needed, and then you could go off and train for it. It was useful but I’d already set up a website and set up the channels [so] could then be told what was all wrong, it just felt a bit backwards.”
There is clearly room for improvement in the provision of Business Wales’s support, particularly in relation to the user journey:
“Business Wales is fine but slow in that it seemingly has to book slots with its advisors, so is not as reactive and immediate as the other two mentioned. I am also not convinced they have understood our growth potential.”
“It’s all advisor support, but then the things advisers suggest they can support you onnone of that ever seems to come to fruition either.”
“The support from Business Wales is very slow to respond and hard to access”.
One of the key issues here is that the timelines for the public sector doesn’t always match the tight timelines a business is adhering to in order to develop their business. This was a commonly repeated complaint across our interviews with firms when discussing engaging with business support and government bodies.
One interviewee associated the long delays with the level of appetite for risk, drawing a comparison between the current process and that in place via the previous Welsh Development Agency:
“At the WDA all the personnel had a business background, and it wasn’t risk averse…the WDA identified a relationship with the business, identified the need, used European funding, put a feasibility study together, and that was sealed up in a few months…[That’s] the sort of the speed of how businesses want an answer - today, tomorrow, end of the week. And I don’t think Business Wales could handle that.”
Another interviewee noted that “Business Wales is great for startups, if you’re in the first two years, but once you get established it’s a bit scattergun, everything’s tailored towards start-ups”, which chimes with previous interviews by FSB which found consistently that businesses generally felt there was a perceived cliff-edge in accessing suitable business support for many after the first two years. In this there appears a gap in provision between start-ups and ‘high growth’ firms, with firms looking to develop in a ‘missing middle’ strategy of sustainable growth over time falling through this gap.
The Business Wales Accelerated Growth Programme
The Business Wales Accelerated Growth Programme (BWAGP) is a fully funded initiative designed to support high-growth businesses in Wales and is delivered by a team of business coaches. The programme provides tailored advice and guidance to help businesses achieve rapid expansion, increase employment, and explore international opportunities.
To be eligible, businesses must have clear potential for high growth, demonstrating that they can:
• Achieve 20% annual growth in turnover or employment over two years.
• Create at least 10 new full-time jobs within three years.
• Expand into international markets with strong growth potential.
The programme also supports pre-revenue startups, provided they plan to commence trading within 12 months and show strong potential to meet the growth targets.
Other comments on Business Wales noted that it was ‘very business plan focused’ and did not address their needs, and another that it was ‘generic’ but also noted that as a free service it could not be expected to be ‘everything to every man or woman.’
On engagement we also asked the following options on what types of engagement would be most appreciated by SMEs:
Q7. Which of the following are important to you when engaging with advice services?
Answer Choices
to face contact with advisers
and accessible language (i.e. jargon-free)
An annual check in, assessing what support services available could help my bespoke business needs – a ‘Business MOT’
Contact virtually (e.g. through zoom, teams, facetime etc) 28.74%
Digital platforms to access business support services
The type of engagement advice most valued is ‘Being able to talk to a specialist who understands my sector’ at 62%. The small number accessing private consultants is surprising in this regard, as most specialist support of this type would be more likely found in this area than through (for example) Business Wales. This perhaps indicates – alongside the fact that the small sample who use this service are generally appreciative of the quality of support – that there may need to be better interlinking across the system to suggest paid for private support as a good option, possibly with a register of practitioners and specialisms. It’s also the case that there may need to be a mid-range support that sits between the ‘high growth’ side and the ‘everyday businesses,’ to address those businesses that are not startups, are not high growth but want to develop. As noted, this is why a voucher scheme to encourage use of these services could be beneficial.
The second most appreciated factor is a single point of contact at 55%. Our interviews provide further insight as to the value businesses get from having access to a single point of contact to help shepherd the business
through a complex system:
“[The] average business owner I find want somebody to just sit down by the side of them over a cup of coffee and talk to them or let them talk about their challenges and then come up with some type of solution.”
Face-to-face contact is also clearly important for businesses, again echoed during our interviews:
“But I feel that I can ask you to explain things that I don’t understand. It’s dynamic and it’s live, it’s real time and I did not feel that with the finance application. What’s actually best for me? What are the options open to me? I feel I could ask those questions of you here. But those are not the sort of questions that I felt I could have answered in an e-mail back and forth with two or three days delay in between each reply.”
This suggests that while there is an understandable centralisation of expertise to national level (following less funding after the UK left the EU), and the future is likely to include increased use of digital and AI, for many SMEs, the face-to-face and individual contact is important, and so needs to be included as a key element of engagement strategies – including local strategies and through local intermediaries - as a means to build trust and understanding.
There are of course trade-offs here in terms of cost and productivity as a national business support service can contact more businesses virtually than they can face-to-face. The balance must be correct. Local network building and local intermediaries can provide additionality to the system and play a key role here, and a local business support network building strategy with resource to develop by place could play a significant role in better access to, and engagement with, the system. Virtual and face-to-face engagement with businesses need to be viewed strategically not as opposites, but as complementary.
A few interviewees cited noted a lack of personal engagement for businesses in the system, despite policies being in place to provide for a single case officer for the entire relationship with businesses. Key areas for improvement are therefore the timeliness of responses and engagement, cutting bureaucracy, and the quality of advisers (explored in further detail later in the report). On timeliness of responses, there is strong rationale
for creating the additional capacity required within the system to address this. This should be reviewed and addressed by Business Wales and the Development Bank of Wales.
• Business Wales should improve the user journey by increasing face-to-face engagement, setting targets for how quickly queries receive a response and implementing a ‘case officer’ approach with a named point of contact for substantive support.
• All business support institutions should ensure a prompt response and clarity on a timeline within which businesses can expect a response or to organise any practical interventions.
The Development Bank of Wales does comparatively well in the survey too, but again with room for improvement. 50% of those who had accessed their service had a positive view, and 8% a negative view, although the numbers of survey respondents who had accessed their support is low (as would be expected), and so these figures should be viewed as indicative only. In the more in-depth interview, it was encouraging to find a business we interviewed had early advice from the Development Bank of Wales on succession and exit that shaped the business approach throughout, so this had provided support for business planning as a holistic life-cycle support right from the start:
“Immediately when I started in 2019, I reached out to the Development Bank of Wales… And it was very constructive because it helped me to move from being a total novice to recognising that I now had a business…For example, the business mentor asked me what is your exit strategy? I’d been in business about two weeks. I had no idea what exit strategy meant. But it forced me to ask myself, what did I see my future as?...how was I going to move from starting a business to the exit point? And what did I need to do on that journey to hit that exit point at the time scale I had in mind in order to realise that future life? It really helped me to focus, to plan. So very positive.
That support has helped me to grow … we could not have done that without that financial support in place.”
A business also accessed the Development Bank of Wales support for new capital investment in vehicles, which had allowed for the business to grow, although there were some reservations about the bureaucracy and engagement during that process (which we will look at further in the engagement section).
One business had accessed support for equipment but felt that access to revenue finance would have helped quick growth:
“We did get two small loans from the Development Bank of Wales for equipment early on. But they’ll give you a loan for equipment, but they won’t give you a loan for growth. We really, really wanted to use money to go out and buy a [product] to move everything forward and we could have doubled our money overnight… [But] it’s too risky, and not capital. So, you can get money against capital equipment [but not revenue].”
As with Business Wales, the issue of slow bureaucracy also featured in our interviews:
“That process was very long and slow and laborious and I think it’s unnecessarily complicated because I have a relationship with them…why [do] I need to give them my date of birth on multiple applications because my date of birth does not change… [If] I’ve got a trading history with you, why would I ask you to tell me stuff that I already know about? I found it infuriating.”
Another business had found the process for Angel Investment provided by the Development Bank of Wales a little wanting:
“We spent hours and hours and hours in the early days doing an investment pitch to the Development Bank of Wales…they kept knocking more and more value off to have more equity for their money…So, we told them ‘No thank you.’ We’d rather do it organically. It’s a harder slog and it’s taking us longer now, but we weren’t going to be dictated to by investors that didn’t really have the core values that we had.”
The business decided that the offer on the table was not to their satisfaction, and the choice of choosing to find their own funding aligns with what the academic literature has found in term of SMEs’ financial list of priorities.16 This same company had found the Innovate UK funding especially valuable, which given that the survey found a small number viewing ‘innovation’ as a priority for accessing funding is a useful insight form someone on the process involved:
“With Innovate UK anything we do with them accelerates and pays back tremendously… We’ve done a couple where we’ve partnered with people. It’s accelerated the product [development]… that we’ve developed that are far cleverer than what we’ve designed as our first initial [product]… We had full project support to take us through develop the uses, to develop IP around the uses, patent them - the full works…We put a lot of time and effort into it, but we always find we get back out what we have put into those projects…It’s a good system.”
This indicates that when businesses access support by Innovate UK it can be very valuable and help them think of how they can diversify their products and look to new markets. Historically, Wales has a relatively low level of innovation funding, which has been further eroded following leaving the EU, with interviewees noting a substantial reduction in core funding for innovation, although there has been work to pool resources across Welsh and UK organisations to make up some of this shortfall.
As FSB’s ‘The Tech Tonic’17 report notes, compared to other OECD countries, at the UK-wide level direct R&D support is predominantly accessed by large firms and it is important that small innovative businesses also benefit from this support. A number of countries, such as Australia, Estonia, Ireland and Luxembourg, have introduced direct SME-targeted funding, which could provide good examples to consider.
Moreover, Wales wins less than its UK population share on R&D – in 2022, R&D expenditure in Wales represented 2.3% of total UK R&D expenditure.18 This reflects a ‘structural weakness’ in its research and innovation system, though what is delivered has a highimpact.19 Funding needs to be better shaped to serve Wales, and SMEs in Wales.
It is encouraging that a Memorandum of Understanding20 has been developed between Business Wales and Innovate UK and that this notes the underfunding and general bias of place and agglomeration hubs in innovation which has disadvantaged areas such as Wales. This work with Innovate UK earmarks a specific amount of funds for Wales for the first time, rather than from a wider pot, including launchpads for Agritech in North and Mid Wales and for a Net Zero launchpad in South Wales. However, tendency remains for money to be aimed at ‘high tech’ projects, rather than process innovation, and tends to privilege larger firms. While these developments are a welcome start, there is a need to do more to address the UK’s historical and continuing underspend in Wales. In doing so it should ensure a proportion of spend for SMEs as recommended in FSB’s ‘The Tech Tonic’ report:
• UK Government should set itself a target that half of all direct Government BERD (Business Enterprise Expenditure on R&D funding) should be directed to SMEs, and implement a strategy to ensure Wales’s proportion of R&D funding at least reflects its population share.
FSB’s UK Tech Tonic report also recommends devolving a high number of current Innovate UK grants to national governments. Our understanding is that there are now funds earmarked specifically for Wales and so this can be further increased and developed in partnership with Business Wales to reflect Wales’s population share.
• Innovate UK should increase the proportion of its interventions in Wales to reflect the wider recommendation on R&D funds.
• Innovate UK and Business Wales should continue to develop partnership working to help address this historical underspend.
16 Berger, Allen N. and Udell, Gregory F., The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle. Available at SSRN: https://ssrn.com/abstract=137991 or http://dx.doi.org/10.2139/ssrn.137991. Under Berger and Udell’s “financial growth cycle” theory founders of new firms tend to seek insider finance from family and friends before and at inception as entrepreneurs are “still developing the product or business concept and when the firm’s assets are mostly intangibles”
17 C Russell, ‘The Tech Tonic: Shifting the ground on tech adoption and innovation in small businesses’ (FSB: 2023), available at https://www.fsb.org.uk/resources/ policy-reports/the-tech-tonic-MCKYQV5I5XCFGN5G7G6KKLGSLC7E
18 Figures available at: https://www.gov.wales/research-and-development-gross-expenditure-2022-html#:~:text=An%20estimated%20total%20of%20 %C2%A3,of%20total%20UK%20R%26D%20expenditure.
19 https://businesswales.gov.wales/sites/business-wales/files/documents/Growing%20a%20business/SMARTCymru%20Brochure%20Eng_growing.pdf
20 MOU available at https://businesswales.gov.wales/memorandum-understanding-mou
Business support type accessed
We asked for which business need SMEs had accessed support:
Q6. For which of your business needs have you used business support services to address? (Please select all that apply)
The most common use of business support services is for financial advice, followed by legal advice, and then help on tax and regulation, closely followed by support relating to employment. This is unsurprising and fits with the areas we usually hear are of greatest concern for businesses.
Following on from our above discussion on Innovate UK, it is notable that innovation was the area for which businesses had accessed support least frequently. This finding is particularly striking considering both the fundamental importance of innovation for economic growth and its prominence within the top three growth aspirations identified by respondents earlier on in the survey. There may be several factors contributing to the low take-up, including innovation funding being skewed towards larger businesses, it may be that the term ‘innovation’ feels abstract, or that businesses are already innovating without seeking formal support. The crucial role of innovation in driving company dynamism indicates a clear need to make innovation support more accessible and tailored to the requirements of SMEs and its benefits clearly communicated in order to effectively foster economic development across Wales.
Other
specify)
Lola Huws Pant Du Cider
Impact of Business Support
To understand whether the support accessed had helped the businesses, we asked the following question:
Q8. How has business support activity helped your business, if at all?
Answer Choices
It helped my business be compliant with regulation (e.g. health and safety; employment law)
It helped my business to grow 27.38%
It helped my business to become more digital 22.62%
It helped my business to survive 21.43%
It didn’t help my business
Other (please specify) 15.48%
It helped my business to become more productive 14.29%
It helped my business to improve employee support 9.52%
It helped my business to become more innovative 5.95%
It helped my business become more environmentally sustainable 5.95%
The main impact of support was to help the business be compliant with regulation, followed closely by helping the business to grow.
The fact that businesses feel compelled to seek external support to achieve regulatory compliance suggests unnecessary complexity within the current framework and that there are ways to simplify and reduce the burden of regulation in order to make the system easier for small businesses to navigate. Planning offers a particularly salient example of this issue.21
Just over 1 in 5 indicated that business support had helped their business survive, and to become more digital. The first of these is important in challenging times. Supporting good businesses to weather economic storms allows them to provide for local jobs and growth during recovery. Given the recent focus on net-zero through the Development Bank of Wales green funds, and also the new roles of ‘sustainability advisers’, those who report using the business support services
to support environmental based changes seems low, although it may be too early to judge. It does suggest that pointing businesses to savings through net zero as a general practice may be useful in raising awareness and take up of this support.
This all highlights the varied menu of support businesses of different types and sectors require and appreciate.
With only 19% of respondents indicating that the support they accessed was unhelpful, it’s clear that business support is valued by most of those who use it, and that it is seen as an important part of the infrastructure for SME success. However, this figure also demonstrates that there remains significant potential to enhance the effectiveness and impact of support services for all businesses in Wales.
21 L ap Gareth, ‘Let’s Ensure Planning Reform is a Pathway to Growth’, available at: https://businessnewswales.com/lets-ensure-planning-reform-is-a-pathwayto-growth/
Chapter 3 Business Support Institutions and Providers
“What we’ve done is we’ve been able to pull that ecosystem together and that’s where the real value …is – it’s sat in what we call ‘the messy middle. We can pull actors and governments together and then push things forward between us and that’s what’s really exciting”
Regional Business and Innovation Hub
In this chapter we move from the firms themselves to those who provide support. We conducted in-depth interviews with key stakeholders (see appendix for methodology in detail), with the aim of having a sample of respondents from different parts of the system (government institutions, private sector, smaller and larger contracted providers, business consultants).
We will also look at how these institutions fit into the wider ecosystem approach outlined in Chapter 1, and how business support strategies in Wales sit within the entrepreneurial ecosystem context. The concept was referenced repeatedly as shaping their role as providers.
This chapter will therefore look at:
1. How to ensure an entrepreneurial ecosystem approach to business support is well steered, coordinated, evaluated and is fully accountable.
2. The key role of Business Wales and the Development Bank of Wales as cornerstones of the Welsh system, and how they need to be developed and improved.
3. The dependencies upon which those cornerstones rely in terms of wider policy, whether spatial (UK or Welsh Government coordination, or local level intelligence and network building) or in terms of policy area (digitalisation, wider skills policy).
Except for on the record interviews with government institutions these are anonymised – and we also conducted off the record discussions with other staff in government institutions which have helped shape our understanding. Some providers felt unable to grant interviews as they were fulfilling government contracts.
1. Addressing the ‘Messy Middle’ - Welsh Business Support Ecosystem
For businesses, business support is simple – it is access to grants, access to finance, and/or advice as they need it that helps their firm to develop, grow or survive. For institutions and providers, the challenge lies in the delivery of those different functions in a way that both serve the varying needs of disparate businesses, through a variety of mechanisms and partners, all while aligning to the aims of UK and Welsh Government economic policy and strategies. So, what can seem simple from the individual firm perspective can quickly become complex from the top-down. As such, delivering a ‘one stop shop’ is as much ensuring a clear ‘front window’ to present to businesses coherently, while a myriad amount of work will need to go in behind the scenes. The aim is that businesses themselves should not see the joins and have as seamless an experience as possible.
We are interested in how distinct parts of the business support sector work together and towards what aims. This aligns to both the traditional elements of what we often narrowly define as business support (advice, grants and finance), but also needs to sit within
wider strategic economic aims, including shaping markets, building toward export, building supply chains, and ensuring we are building capacity and capability through skills. This fits to the diverse needs of businesses from high street retailers to high growth innovation. At the ‘highest’ level it is to look at how we cultivate and promote an entrepreneurial ecosystem in Wales.
This means understanding the role of cross governmental relations in influencing delivery, as distinct functions often sit at different levels of government and governance. For example, R&D and much innovation funding sits largely at the UK level, skills with Welsh Government, and many levers for the development of high streets at the local level. Some initiatives from the centre cut across these different spheres of influence – including Help to Grow which is a UK training programme providing learning and mentoring aiming to improve leadership and management skills, and firm-level productivity, in small and medium-sized enterprises (SMEs), delivered by a network of business schools across the UK. So, as a UK
initiative, in being delivered through the universities it also falls under Welsh Government’s devolved powers on skills. The Shared Prosperity Fund illustrates these, at times, contested areas of influence.
Another example is export, which is largely a UK Government responsibility, but with export being highly correlated with growth (firms who export tend to be more growth oriented) it is an important area to address the Welsh missing middle and promote growth in firms. Business support at the Welsh level needs to be aligned to support business in their journey toward export, what we have termed ‘internationalising Welsh SMEs’.22 This local advisory role in supporting export becomes more important in the current global uncertainty around suitable markets.
The UK’s exit from the European Union has brought about a prolific change in institutionalisation in the UK. Not only are European Regional Development Funds no longer a contributor to the business support landscape in Wales, but it has also meant the relationship between Welsh and UK Government departments has altered along with the role and responsibilities of Welsh Government run arm’s length bodies who have largely been re-established to reflect a change in both funding structures and methods of governing. The significance of these changes can be seen right across the business support ecosystem. These changes have altered access to finance, grant and loan availability as well as market stability for firms considering growth, export, or expansion plans.
In the 2013-2020 EU programming period, the Welsh Government invested around £4bn, a total comprising both EU and national co-financing. This made Wales the largest recipient of ERDF and ESF in the United Kingdom per capita.23 This has fallen substantially. The UK Government’s response to the loss of EU funds for regional development was the Shared Prosperity Fund, launched in April 2022, originally meant to last until March 2025 and now extended to March 2026.
The shape of what takes the place of SPF after this date remains unclear at the time of writing, and its next iteration and shape will be a key decision in the coming months in affecting the business support environment in the next Senedd term.
Another area to note is changing macroeconomic policy and circumstances – the UK Government has foregrounded the mission economy for growth and is developing a small business strategy with a ‘Business Growth Service’ to support it. The impact of this as it
22 FSB Wales, ‘Internationalising Welsh Businesses’ (FSB: 2020)
works through the chain down to communities remains to be seen, but how different actors respond in Wales will be key to its success and impact for SMEs in Wales, and whether it is shaped to address Wales’s economic and business needs.
So, it is a complex and often fuzzy picture. The wiring can look messy. Indeed, one interviewee in discussing the role of business and innovation hubs noted that their role was to sit in – and tidy up for outsiders – ‘the messy middle.’ The aim is to make that process in accessing support as simple as possible for the user, while also fitting to a clear strategy across the institutions at the ‘top.’
With many changes happening in the global economy, a changing wider UK policy landscape and economic strategy in development, uncertainty on future funding and its shape, and the continued complexity of provision in Wales – albeit with the competitive advantage of a one stop shop approach through Business Wales –this is the time to provide a full wide ranging review of business support in Wales. The aim should be to understand its role in the wider economic strategy and governance landscape; its future aims and priorities and how it best fulfils its mission and remit to support SME growth. It should be geared in its terms of reference to ensure that it is provided with the necessary funds and resources to fulfil its aims and to support the wider entrepreneurial ecosystem.
• Welsh Government should commit to a widespread mapping and review of business support in Wales, ensuring alignment to future needs of the economy.
Steering Collective Action – Accountability, Measurement and Impact
One concern with ensuring collective action across the system is that the entrepreneurial ecosystem approach, as the OECD notes, carries a risk of being incoherent and prone therefore to unrealistic, woolly, or unmeasurable targets. It is important that the entire system is steered and held accountable for strategic goals. Accountability will be key to ensure that the different strands are coordinated and are performing to their strategic KPIs. If – as FSB Wales will recommend in this chapter - business support institutions are further capitalised and grow in their operations and responsibilities, while operating with relative autonomy and retaining an independence from ‘everyday politics,’ this will be more important.
23 House of Lords Library, ‘Brexit: Replacing EU funding in Wales’ (2021), available at https://lordslibrary.parliament.uk/brexit-replacing-eu-funding-inwales/#:~:text=The%20table%20below%20shows%20that%20on%20average,be%20found%20on%20the%20Welsh%20Government%20website.
To implement the UK Government’s mission for growth and development of an industrial strategy in a way that has real impact at the Welsh and local level, effective collaboration across Wales’s entrepreneurial ecosystem and the ability to shape the interventions is needed.
Five key conditions for successful collaboration are a common agenda, shared measurement systems, mutually reinforcing activities, continuous communication, and backbone support organisations.24 This collaborative approach can be a challenge with many struggling with the priorities and needs of different actors. For example, university research timelines may clash with the private sector’s need for speed and certainty, and governments may revert to hierarchical models that risk stifling innovation. Therefore, it is essential that the UK and Welsh governments work together to provide a clear, shared vision. This vision must be underpinned by specific objectives to which all parts of the ecosystem feel they can contribute.
Successfully delivering this ecosystem approach requires more than just ‘hard’ resource sharing; it necessitates building ‘soft’ aspects like norms and culture, which foster trust and understanding, supporting effective collective action. This need for building ‘soft’ aspects is reflected in the OECD’s emphasis on deploying “whole-of-government approaches to SMEs and entrepreneurship”. As the OECD note:
“Policies and instruments of relevance to SME development and entrepreneurship are wide and varied. They often cut across the boundaries of ministries and government agencies, as well as across levels of government. This calls for effective policy coordination and governance, and for taking the spatial dimension into account. It involves adopting an SME and entrepreneur lens early on in policy design and delivery across a wide range of policy areas. It also involves understanding how diversity in the business population affect policy effectiveness through granular and timely data collection and evaluation tools, as well as engaging actively with SMEs and entrepreneurs.”25
As such, when approaching the question of how best to shape a business support framework, it is important to understand how distinct elements of the ecosystem work, where they support each other and how SMEs can be best engaged.
To ensure that collaborative efforts within the entrepreneurial ecosystem are truly effective, robust measurement and evaluation are essential. Recognising this need, the OECD has conducted research that highlights significant challenges in current evaluation practices. The OECD notes the difficulties of measuring factors like ‘culture and norms’, highlighting that many evaluations of SME policy across Europe are inadequate, failing to provide the necessary insights to guide future policies or assess intervention success. To address these shortcomings, the OECD recommends:
“…better use of existing data within government for evaluation purposes and adopting more sophisticated evaluation techniques using control groups. Work is also needed to specify the objectives and targets of policy in advance of evaluation, to benchmark programmes against others based on their evaluation results, and to evaluate the impacts of macro interventions such as changes in the tax and regulatory regime as well as expenditure programmes aimed directly at specific groups SMEs and entrepreneurs. Evaluation evidence must also frame future policy decisions.”26
Failure to implement effective evaluation strategies risks misallocating resources and hindering the ability to identify those policies that can effectively drive sustainable growth for SMEs. It is reassuring in this case to note that evaluations in Business Wales and the Development Bank of Wales have taken on recommendations, such as a control group in understanding impact. Outside of these institutions there does appear to be inconsistency in what are the KPIs and core measures of impact in terms of business impact.
While noting the need for clarity of intervention policies at the short-term level, the OECD similarly note the need for coordination across government and institutions:
24 J Konia & M Kramer, ‘Collective Impact’ in Stanford Social Innovation Review (Stanford: 2011), available at https://ssir.org/articles/entry/collective_impact
25 OECD, Framework for the Evaluation of SME and Entrepreneurship Policies and Programmes 2023 (OECD: 2023): https://www.oecd.org/en/publications/ framework-for-the-evaluation-of-sme-and-entrepreneurship-policies-and-programmes-2023_a4c818d1-en.html
26 ibid
“It also involves understanding how diversity in the business population affect policy effectiveness through granular and timely data collection and evaluation tools, as well as engaging actively with SMEs and entrepreneurs. The OECD works with countries and regions to strengthen business statistics and policy information, develop benchmarking and monitoring tools, and deploy whole-ofgovernment approaches to SMEs and entrepreneurship.”27
The OECDs report on regional governance and public investment in Wales28 provides a starting point to better understand where governance is a barrier to facilitating growth and engaging effectively with firms seeking growth through business support. The OECD recommends a digital dashboard, integrating a wide range of existing local authority data, including on economic performance, education, and infrastructure. This would provide a comprehensive understanding of regional challenges, enabling informed government decisions on business support and improving firm engagement.
The OECD emphasises the critical role of collaborative working for effective regional development and recommends that key institutions, including government agencies, universities, and businesses, adopt shared, cross-sectoral objectives. To ensure successful implementation, the OECD advises establishing clearly defined roles and responsibilities, developing actionoriented plans to maintain momentum, and fostering regular communication between partners. Furthermore, the OECD highlights the importance of conducting regular performance and impact assessments to track progress and make necessary adjustments.
It is also to be noted that concerns were raised in off the record interviews that different institutions were measured to different standards and varying levels of KPIs for economic impact. This is also a concern we have raised consistently in wanting clear economic KPIs across all such bodies, aligned to economic strategy. While it makes sense for different bodies to focus on different areas (and so look to different impact), it is important too that there is consistency on measurement and evaluations on key economic indicators, and that this promotes common strategic aims. All arm’s length
bodies should have attached with their business plans key performance indicators as any private sector business would have to ensure that business operations are effective and of value.
To address these issues, FSB Wales envisions the creation of a Business Growth Board tasked with the role of holding to account key bodies in the system and ensure that measurements around growth are applied consistently and in a way that allows us to assess impact.
The Business Growth Board as a scrutiny mechanism would hold business support institutions accountable for areas such as:
• Impact of ongoing programmes against the aims of their strategic plans (i.e. Business Wales’s five-year programme).
• Analysing how business support is delivering against Welsh Government economic targets and future economic strategy.
• Satisfaction levels in relation to the user journey.
• Key KPIs and measurements on economic impact should be consistent across all bodies involved in the economy and business support, using the OECD recommendations on effective measurement and clear remits and cross-institution collaboration.
• How effectively business support is aligning with Welsh Government strategies on gender, race, LGBTQ, age and language and should be adequately resourced to build support for all communities in Wales. Local partnership working should be developed further to this end.
• Whether business support is adapting to future needs.
The Welsh Government should:
• Establish a Business Growth Board to convene stakeholders from across the business support landscape.
27 ibid
28 ‘Regional Governance and Public Investment in Wales, United Kingdom’ (OECD: 2024), available at https://www.oecd.org/en/publications/regional-governanceand-public-investment-in-wales-united-kingdom_e143e94d-en.html
2. The Core Business Support Institutions – Business Wales and the Development Bank of Wales
While there are many actors involved in supporting businesses, it is important that there is a core to steer and coordinate the system. The key bodies unique to Wales remain Business Wales and the Development Bank of Wales and these merit closer analysis and their strengths and weaknesses understood to develop them for impact in the future. The wider dependencies for their success will then be analysed in the next section.
Business Wales
Impact Analysis and Evaluations
Business Wales, aligning with the Welsh Government’s broader economic, social, and environmental objectives, support businesses at various stages, ranging from entrepreneurship to startups to high-growth enterprises. Their support covers a wide range of services, including business development, international trade, skills and employability, digital transformation, and green economy initiatives.
Unfortunately, the latest evaluation of the impact of Business Wales is from 2021, when Welsh Government commissioned Cardiff Business School to provide an
independent assessment of the economic outcomes associated with Business Wales in its strategic programme from 2015-21.
The findings of this impact report included:
• net GVA up-lift was £18 per £1 spent on the Accelerated Growth Programme and £10 per £1 spent on Business Wales core delivery
• four-year survivability of businesses assisted by the Accelerated Growth Programme was 77%, compared with 67% for Core and Growth assisted businesses, compared with 33% for non-supported businesses.
• credit scores of Business Wales supported businesses were less likely to be high risk and more likely to be stable & secure than unsupported businesses.
The use of control group and evaluation methods following good practice in this analysis is heartening. However, we were disappointed that the 2021 analysis (which came as a full evaluation the close of the previous plan) was the latest publicly available data on impact.
• Business Wales should provide annual data reports on impact of ongoing programmes against the aims of the five-year programme.
• Business Wales should report annually to the Senedd Economy Committee to provide scrutiny and to ensure information on impact and ongoing work is shared with the Senedd.
The fact that Business Wales sits at the centre and as shorthand for business support in Wales is itself an advantage, and its brand recognition – particularly after the extent of businesses accessing its services during Covid-19 – is a competitive advantage and attests to success. While from the outside it looks to be a ‘one stop-shop,’ Business Wales covers a very wide array of activities and responsibilities and is better seen as an umbrella for those when analysing the business support ecosystem.
Firstly, it is important to note that Business Wales activity is split into different arms:
• Welsh Government and policy
• Providers and Contracts to deliver services
As Business Wales put it in our interview:
‘The Welsh Government plays two parts in the delivery of Business Wales. There’s direct delivery - so our helpline and digital activity is delivered by civil servants. And then some of the other themes within the Business Wales activity is delivered by third party contractors. So, there is a nuanced position when people say the word Business Wales. We are often associated with the government or associated with the provider with which they’ve been working. But I think it’s important that we’ve maintained that brand within the Welsh Government as the voice of talking to business as the one stop shop.’
This ‘brand’ raised concerns among some officials in off the record discussions that Business Wales may be associated negatively with government, at a time where societal measures of trust indicate a lack of trust in government. We did ask a question on political sentiment and found only 14 % agreed that Welsh Government ‘understood the needs of people like
me’, with 66% disagreeing with the statement (the equivalent for UK Government was 3% agreeing and 77% disagreeing with the statement). This reflects wider opinion on trust in government.
However, given the far higher satisfaction with the business support services, it also illustrates that the Welsh Government business support services are seen as separate and seen as part of the furniture. This depoliticization of service is to be welcomed and shows the brand stands outside day-to-day politics, which supports the stability of, and trust in, the service.
So, in contracting services and partnerships, Business Wales has a web of services delivered through different organisations, whether public sector, university linked, or through social enterprise or private sector consultants and organisations who respond to the tender. This allows the use of others’ expertise.
“Businesses will access support when they think they need it…”
“I think there’s two sides to it - one in terms of we must leave the market to do what they want to do. They’ll access the service if they need it. … But some of the stuff we do, we proactively engage with communities to ensure they’ve got the same empowerment to access the provision we have. So, it’s one or the other. But we need a mix of both.”
There are some audiences– whether businesses by identity (female entrepreneurship, ethnic minorityowned businesses) or businesses by type (sector specialism) – that are identified through reference to Welsh Government action plans as requiring proactive outreach:
“It’s about empowering people who are furthest away from service to make sure they’re able to access the services that they want too…So an example of that might be a community finance organisation in Cardiff that we’ve worked with to reach out to Black, Asian and Minority Ethnic communities and they sometimes will do some reaching out and it’s almost like a soft introduction to Business Wales where maybe traditionally they would not
have picked up the phone to a corporate organisation like Business Wales. And that’s worked well in in quite a lot of communities.”
This partnership role in aligning to various equalities strategies is important and should be continued and further developed, and partnerships extended as appropriate. Latest figures place female entrepreneurs as making up only 32.3% of the UK’s smaller business leaders.29 Enterprise Nation’s most recent Small Business Barometer found that the average age of the UK’s business founders was 46, and that 35% of businesses are started and run by people over 50. 30 When accounting for the age of businesses averaging 8 years (according to Companies House data), this is unsurprising. The ONS has estimated that in 2021 around 12% of UK self-employed business owners identified as being from a minority ethnic group, 31 while the UK Government’s Small Business Survey estimates 7% were led by people from a minority ethnic group in 2023. 32 Welsh Government analysis notes that 2.7% of SME employers in Wales were minority ethnic groupled, which is the lowest in the UK. Disabled-owned small businesses account for 8.6 per cent of the turnover of all UK businesses and disabled people are more likely to go into self-employment than non-disabled people. 33
Entrepreneurship opportunities are vital to providing equal opportunities, in developing business skills and in building a representative business community, serving to identify needs and markets of all communities in Wales.
• Business Wales should continue to align with Welsh Government strategies on gender, race, LGBTQ, age and language and should be adequately resourced to build support for all communities in Wales. Local partnership working should be developed further to this end.
• The Young Person’s Guarantee must retain a meaningful offer to young people on entrepreneurship, and business support resourced and aligned to this agenda.
As well as building networks and partnerships based on identity, this partnership work is also on the basis of identity of place, that is on areas that need further
proactive support, and these interrelate to some degree. The spur for this local partnership approach appears to have been a retreat from direct services by Business Wales at local levels in some areas of deprivation, which followed funding cuts after leaving the EU. Business Wales has lost over a quarter of funding (from approx. £30m to £22m) in the last decade, which has reoriented its prime focus from initiatives at the grassroots ( such as ‘heads of the valleys’ initiatives and ‘taste of enterprise’ in the term from 2015-21) to a more all-Wales focus, bringing partners identified through equalities and other strategies for more localised or sectoral engagements.
Business Wales should:
• The business support system is a competitive advantage for Wales. As Business Wales’s brand commands high recognition levels, it should continue to serve as an umbrella across services in Wales where appropriate.
• Guard against mission creep and retain their SME focus as well as ensuring a balance across the diverse needs of different businesses in Wales.
• Conduct core function reviews and evaluations, aligning to new programmes for government, at the start of every Welsh parliamentary term.
Development Bank of Wales
With Wales no longer receiving EU funds and facing uncertainties regarding the Shared Prosperity Fund and the Levelling Up Fund, the accessibility, reliability, and appropriateness of funding from the Development Bank of Wales becomes increasingly crucial for Wales’s economic stability and growth ambitions.
The Development Bank does well in terms of recognition. In FSB Wales research from 2022, 65% of respondents were familiar with the Development Bank of Wales. Additionally, 60% of those who hadn’t used its services were still aware of its existence. Our 2024 business support survey found that 46% of respondents had applied for business support from either Business Wales or the Development Bank of Wales. Of these respondents, 50% cited a ‘Good’ to ‘Very Good’ view on the rate of quality of service they’ve received specifically
29 British Business Bank figures, available at https://www.british-business-bank.co.uk/business-guidance/guidance-articles/business-essentials/overcomingchallenges-female-entrepreneurs-face
30 Enterprise Nation, Small Business Barometer 2024
31 Figures available at https://commonslibrary.parliament.uk/research-briefings/sn06152/#:~:text=The%20British%20Business%20Bank%20in%202020%20 found,other%20minority%2Dethnic%20groups%20and%2089.9%%20were%20White.
32 ibid
33 B Gooch, Business Without Barriers (FSB: 2022)
from the Development Bank of Wales with only 8% respondents citing ‘poor’ quality of service.
The Development Bank of Wales’s34 latest report provides a review of performance and impact, with the bank returning to profit after a loss in 2022/23, ‘attributed to the improving macro-economic conditions and high base rates during the year.’ The bank delivered 491 investments totalling £125.2 million and generating £50.1 million of private sector co-investment in 2023/24 with 4,406 jobs created or safeguarded against a target of 3,779. They invested in 430 different businesses that range from the smallest start-ups to scale-ups and those looking to realise value at the point of exit. Following the OECD best practice, evaluation included a control group of similar SMEs that did not receive funding, showing a high proportion of the turnover and jobs created or safeguarded were additional, in other words, they would not have happened without the support.
This evaluation followed best practice as set by the OECD of analysis against a counterfactual ‘control group’ of equivalent businesses that did not receive support. The analysis indicates that approximately 58% of the employment growth and 60% of turnover gains were additional. This shows that where the Development Bank of Wales does invest, it has a significant impact, and so the question is generally whether it needs to invest more widely and take more risk.
Its customer service feedback was impressive. The Development Bank of Wales saw a score of 90.8 from a response rate of 55% based on the NPS index that forms its performance indicators. As noted in the last chapter, only a small sample of those who responded to our survey had accessed support via the Development Bank of Wales but paints a less positive picture. There is potential that the survey response could include those who were not successful in accessing finance with the Development Bank of Wales, which could explain some of the negative perceptions, while raising some questions on accessibility of finance to different SMEs.
The Development Bank of Wales’s engagement approach is to have a broader mix of embedded advisors on the ground, while also seeing intermediaries as a key relationship. This reflects the more complex offer in finance:
“One of the first things I’d say is key to our delivery is having people embedded in the regions. That’s really important. So, we’ve
got people right across Wales in our offices. You know, they are living and working in the place where they want to invest. That’s always been an important strategy for us. I don’t think you can deliver what we do without having people there round and about - because they are then out to talk into the SME’s and talking to the business communities.
So, our business development activity will look to get our message across to what we term the ‘intermediary market.’ So that would be the bank managers, the accountants, the business consultants, lawyers and so people who will be working with these SMEs. So, it’s about making sure that they understand where the bank could fit in, and then they’re there to advise the client at the right time.
In terms of going directly to the businesses, we do do that. But what I would say is it’s trying to make sure you catch the business at the right time where they’re looking for funding. So that’s where an intermediary can sometimes be a little bit more effective because they’ve got that ongoing relationship with businesses.”
For the Development Bank of Wales, it is useful that trust in accountants and lawyers – their key intermediaries – is highest in our survey. It is therefore important that the Development Bank of Wales maintains and builds those links, and any future review should look at how they engage and maintain that sector, and any representative bodies to ensure they are up to date.
Another question raised was around green loans – the current green loan is specific in its targeting, but it would be possible in future to add a ‘green efficiency bonus’ providing lower interest rates for loans across the Development Bank of Wales’s portfolio and so mainstreaming it throughout the activity. In effect, this already happens with better rates for its construction loans for better efficiency and environmental impacts. We believe this to be a promising idea and would
34 Development Bank of Wales, ‘Annual report and financial statements 2023/24’, available at https://developmentbank.wales/sites/default/files/2024-09/ Annual%20report%20and%20financial%20statements%202023-24.pdf
provide incentives and support to SMEs transitioning to net zero and should be further explored, with the emphasis being on additional bonus and incentives for efficiency measures of wider social value, rather than any additional costs to those not able to undertake these measures.
The Development Bank of Wales needs to be capitalised and resourced to be able to support businesses to build their capacity and capabilities and to take advantage of new opportunities. As noted in Chapter 1, continuing market failure remains a severe impediment to access to finance for SMEs in Wales and its role is important to address this.
Our view is that it can increase its independence and ensure stability through being placed on a statutory footing.
It is important that it is also able to look to increase its own capacity and resource to capitalise and support SMEs. Welsh Government should explore how the Development Bank of Wales can move towards building capacity in managing long-term investment funds on its behalf, looking to develop and look for further opportunities like its successful use of the Clwyd Pension Fund for patient capital. Further opportunities in funds such as the Welsh Pension Partnership (WPP) should be explored to increase capacity for SME finance investment. The WPP has total assets worth £25bn (as of 31 March 2024) of which £18.5bn (74%) has already been pooled. The majority of the pooled liquid assets sit within sub funds with passive investments (£5.2bn) effectively within the pool but are held by the respective WPP authorities in the form of insurance policies. 35
The WPP has launched the Private Debt, Infrastructure and Private Equity Investment programmes, managed by external fund managers who specialise in private assets and are tasked with achieving strong, riskadjusted returns over the long term. A review of business support will need to look at options like this in greater detail and to assess the appropriate role of the Development Bank of Wales and whether it can take on more responsibilities in generating long term wealth for Wales, without compromising its focus of providing access to finance for SMEs.
The Development Bank of Wales’s role in the wider economic development ecosystem is vital, and we should expect it to develop and to be ambitious for future development. However, it is also important that it retains its core remit in supplying access to finance to SMEs and that ‘mission creep’ or risk of overreach is also managed. The role of accountability through Business
Growth Board noted above is important to ensure such risks are mitigated.
In retaining its focused SME remit, our view is that its main role would be to work with others in the ecosystem to ensure that finance is used to support wider policy goals. It is encouraging to note that the Development Bank of Wales is now working across wider areas of government policy than the economy department (such as housing), and it should ensure that a Welsh SME lens is provided in shaping and implementing policies, such as the National Wealth Fund, and in working with the British Business Bank.
The National Wealth Fund
The National Wealth Fund (NWF) is a policy bank established by the UK Government to partner with the private sector and local authorities to finance infrastructure and other projects. Its core functions include crowding in private sector investment to priority areas - clean energy, digital and technologies, advanced manufacturing, and transport – through equity investment, debt, and guarantees, alongside offering advisory services and low-cost finance for local authority infrastructure projects.
The NWF presents a strategic opportunity to mobilise capital and drive economic growth, which in Wales could significantly benefit off-shore wind developments. To maximise its impact and address regional disparities, the NWF should also strategically direct capital towards less economically diverse regions across the UK excelling in areas like R&D, agriculture, tourism, manufacturing, and fintech. This includes supporting infrastructure improvements and fostering the development of policies that encourage innovation. Finally, ensuring SMEfriendly policies and a robust business support system are crucial to enable smaller businesses to effectively benefit from supply chain opportunities generated by NWF investment.
FSB Wales would welcome the administration of the NWF in Wales being developed through effective partnership with the Development Bank of Wales and would encourage the UK Government to work with the Welsh Government to assess how bodies such as the Development Bank of Wales can become a vehicle for Welshspecific investment opportunities, focused on wealth creation.
35 Figures available at https://walespensionpartnership.org/sub-funds/
In a previous report we have called for a Development Agency to ensure SME focused foreign investment and to coordinate the system, and FSB Wales would see the Development Bank of Wales working closely with any such body. They would ensure their strategies align and policy around access to finance ensures any investments have maximum impact through building SME capacity to take supply chain opportunities, for example. Other organisations have suggested different means to bring in investment. The point for our purposes here is that the Development Bank of Wales should be aligning their SME finance focus to the wider institutional architecture in place at a Wales and a UK level to support investment. This allows the Development Bank of Wales to retain its SME remit, while ensuring its remit supports ambitious aims for investment, big projects and wider economic policy in Wales.
In our interview with the Development Bank of Wales, they noted the need to adapt and fit into the wider UK policy landscape, such as the industrial strategy, Mission for Growth and the commercial activity of the UK National Wealth Fund. It was noted that their ongoing work with the British Business Bank, both through UK Investment Fund and with shared office space in Wales, has helped to bridge a gap in providing access to finance to SMEs in Wales and has been a good example of utilising effective partnerships to the different strengths of each organisation. This partnership could be developed further to ensure that implementation of UK and Welsh economic policy is integrated across the board.
• Welsh Government should place the Development Bank of Wales on a statutory footing to provide certainty and stability for the long term.
• The use of Clwyd Pension Funds has been successful and a good model for investment. Welsh Government and the Development Bank of Wales should explore how other sources of funding (such as the WPP) in Wales could be used to develop patient capital for uses such as net zero transition, as well as to attract outside investment.
• In addition to its specific green loans, the Development Bank of Wales should develop the use of a ‘net zero bonus’ across all its loans so that there is a lower % interest to undertake net zero efficiency adaptations as part of a loan to incentivise developments. This would be on the basis of additional reward for undertaking these measures to reflect their social value, rather than punitive for those who cannot do so. The bank already does this for construction sector loans, and this should be expanded to encourage net zero adaptations in general.
• In expanding any work, the Development Bank of Wales should guard against ‘mission creep,’ ensure it retains its focus on SMEs, and guard against over extension. Accountability from the Senedd should place this as core to its scrutiny.
• Where suitable, delivery of the National Wealth Fund in Wales should be developed through effective partnership between the British Business Bank and the Development Bank of Wales. Welsh and UK Government should consider tasking these organisations to develop a Wealth Fund Unit to implement the fund in Wales, a unit that could also adapt to any future Welsh wealth funds that may be developed.
3. Dependencies for Success in the Ecosystem Approach
Broadly, our view is that Business Wales’s broad approach is the correct one, allowing for a strategic mix of consistency and adaptability, in providing a one stop shop for businesses while providing a tailored and proactive service across different business and community needs through partnerships under the umbrella and brand of ‘Business Wales’.
However, it does mean Business Wales and its sister organisation the Development Bank of Wales are dependent on other parts of the ecosystem to act as effective intermediaries and for those intermediaries to be effective, and there may be gaps where such effective local partners do not exist. Understanding those dependencies – and so wider policy - is vital to extend support equally to business communities in different parts of Wales.
Policy from ‘above’ is required through consistency of approach across governments, as does clarity around the wider macroeconomic approach. This mitigates risks of uncertainty at the top feeding through the system or contributing incoherence.
From ‘below’ – the local business environment in turn provides the context for businesses to first access and engage business support and are often the trusted local actors that SMEs will use. Local networks and forums for businesses are important to how the information gets out to businesses, alongside how businesses initially make the contact. Our interviews with more local providers suggest that they are important stepping stones to bringing SMEs into the system as they are trusted and embedded in local business networks in a way that – at least with current resources – central bodies are not. We look to these wider dependencies in the ecosystem now.
Political Leadership and Macroeconomic Policy
The wider economic strategic environment and how Business Wales reacts to it is an important part of the equation. The impact of separate policy decisions and different actors’ priorities in shaping the programmes and engagement Business Wales pursues can either simplify or complicate its role as a ‘one stop shop.’ For example, managing the contradictions between UK’s SPF and levelling up approach which focused on local authorities’ implementation and UK centralised decisions alongside the Welsh Government focus on
regional strategic approach through Corporate Joint Committees or ambition boards makes for conflicting needs, interests and actors, and adds to complexity. In another way, many organisations should clearly sit under the umbrella brand of Business Wales (such as Industry Wales, Farming Connect, and so on) but it is also important that they share a mission, that roles and remits are clear, and ways of working across the organisations ensure that they work together and not duplicate or act in competition.
In any case, in future funding there needs to be clarity and alignment of approach from the UK and Welsh Government on the role of regional bodies, how they work with local and national partners and how they serve regional economic strategy.
There are two key areas to consider in terms of understanding the current position and how it needs to be shaped for the future:
• Impact of post-European funding approach
• New potential areas of macroeconomic policy (examples are the new UK Industrial Strategy, UK Small Business Strategy, UK Business Growth Services, UK National Wealth Fund)
The first of these points, and the experience of changing funding environment after leaving the EU, indicates how the impact can directly and indirectly impact on the work of a coordinating and ‘one-stop-shop’ role of Business Wales. Directly, this is in terms of funding (in losing a quarter of its budget), but it also indirectly impacts on the scale of its work and a more complex fragmented environment.
As interviewees noted, needing to signpost to a more complicated funding and business support environment have made matters more complicated, the required information from and to business more multilayered. So, a business in “Pembrokeshire would be able to access grants and different business services, but if you’re not in Pembrokeshire you won’t have the same provision and that’s complicated”.
This more localised funding model based around local authority footprint has made the ‘messy middle’ more complex, with ‘more focus on place building and regionalization’ but it has still needed ‘some national services alongside that’, and so, ‘there was a coordinating function at a national [Welsh] level.’
While increasing local complexity, centralising the responsibility over post European funding and decision making to Westminster also led to centralisation of decisions on funds. While not something interviewees would say explicitly, it seems there were problems in fragmentation at the top between UK Government and Welsh Government policy. Cross government relations at UK and Welsh Government level in turn had an impact on coherence from the top, and in turn to prospective business support users downstream in the system.
This was a concern FSB Wales had outlined as a risk before the change to SPF as an outcome. 36 Any future SPF funding or approach to support UK initiatives37 requires strategic alignment across UK and Welsh Government to promote simplicity and a stable system from the top-down and for the long term. Our position following the UK’s exit from the EU was that decisionmaking on funding at the highest level should lie with Welsh Government, and the UK and Welsh Government are now committed to this approach.
Within Wales, the OECD has produced several recommendations on the principles of collaborative working which draws on the role of CJCs, Welsh Government, local authority and UK Government in some instances. The recommendations emphasise the need for institutions to adopt common objectives for regional development that cuts across policy areas. Well defined roles and responsibilities to deliver on these strategies as well as adopting an action orientated plan to maintain momentum are also suggested. The OECD also stress the need to ensure that regular touch points are maintained between partners to ensure there is on-going assessment of how these principles are being absorbed by the Welsh Government and local authorities. There is also a need to ensure that funding from top down relates to this new architecture effectively.
It is vital within these initiatives that the lessons are learned from good and bad practice both in previous EU funding and in the SPF and levelling up agenda. The first lesson is to ensure a clear regional and national Welsh level regional development agenda, which aligns institutions and strategy across UK and Welsh Government. Welsh institutions have a vital role to play in that regard as arm’s length bodies that can implement
across the governments, but it is also important that they are not expected to negotiate across dysfunctional relationships.
The UK is looking at developing an SME focused ‘Business Growth Service’ tasked to support SMEs. It is important that this should not replace, duplicate or dilute the service provision in Wales. The emphasis should be on using what is in place already, what is well recognised by Welsh businesses, and what works best in Wales.
• UK Government should use what already works: Recognise the strength of Business Wales’s brand and knowhow when shaping new policies, including the delivery of the Small Business and Industrial Strategy, and use these existing mechanisms to deliver towards their economic aims.
• UK Government should ensure any new UK level ‘Business Growth Service’ to support SMEs does not duplicate, displace or dilute the Business Wales brand and work in Wales, but supports it.
• Welsh Government should use the restoration of decision-making on EU replacement funds to implement a comprehensive economic strategy, delivered in partnership with local governments and Corporate Joint Committees. The approach must be underpinned by the recommendations put forward by the OECD in their Regional Governance and Public Investment in Wales Report.
• Given the likely overlap between UK and Welsh Government business support programmes (e.g., export support, investment incentives), both must provide greater clarity on how they will collaborate in UK-wide initiatives, such as the UK industrial strategy and the National Wealth Fund, and how Business Wales will deliver on behalf of both governmental strategies.
36 L ap Gareth, ‘Building Businesses’ (FSB: 2022), available at https://www.fsb.org.uk/resources/policy-reports/building-businessesMC6H4J2W2ID5BTLO43YINGD5HZYE#:~:text=Building%20communities%20through%20business%20support,take%20advantage%20of%20new%20 opportunities.
37 FSB Wales has provided detailed view on the need for a Welsh component and responsibilities in the Industrial Strategy and Mission for Growth in its consultation response to HM Treasury in 2024.
Invest 2035: Proposals for modern industrial strategy
In October 2024, the UK Government published Invest 2035, a green paper detailing proposals for a modern industrial strategy, which forms part of their mission to achieve the highest rate of sustainable economic growth in the G7 and is intended to support regional growth, net zero ambitions and the UK’s economic security and resilience. The green paper includes proposals to:
• Target support on eight “growth-driving” sectors as well as places with high-growth potential, including city regions, regional clusters and strategic industrial sites.
• Create a pro-business environment by working in partnership with stakeholders including businesses, trade unions, mayors and devolved governments.
• Establish an industrial strategy council to advise the government and monitor implementation of the strategy.
The industrial strategy offers a crucial opportunity to reshape the UK’s growth agenda by focusing on its regions and nations and providing a supplyside blueprint to strengthen and futureproof the economy; ensuring robust supply chains, accelerating decarbonisation, and maximising opportunities for young people.
To effectively deliver for the Welsh economy, a distinct Welsh component is essential, acknowledging the diverse needs and the institutional landscape and targeting key Welsh growth sectors.
The UK Government is not expected to publish the final industrial strategy until June 2025 at the earliest.
Any mapping exercise of organisations should ensure a clear remit and ways of working for organisations within the business support ecology to ensure they are working toward shared goals and play to each organisation’s strengths. Memoranda of Understanding should be further used to ensure clarity on ways of working across organisations in Wales, including between bodies in Wales and UK. A prudential approach for each governance level to ‘do what you do well’ should be adopted and reflected in decision making through the system:
• Local: place making and local market knowledge.
• Devolved and Regional (the latter includes the Welsh business support system as well as growth regions, CJCs etc): translate UK aims to regional economic policy and coordinating actors at that level.
• UK: general strategy for growth (macroeconomic strategic aims); fiscal firepower and support; funding pots.
Distinct levels of governance should not be viewed strictly hierarchically. For small local businesses, the shaping to local needs is as important as the macroeconomic policy. The key part is therefore to ensure that coordination of policy at UK and Welsh Government level is done on a consistent and stable basis, with clarity on the agenda for Wales for the long term. This coherence from the top then allows the implementation of wider UK policies to be better, and there is room to use the infrastructure to better deliver on those policies, and shape them to Welsh SME needs. This was a question of which Business Wales were aware, and raised in relation to UK economic policy:
“What is the role for Business Wales in future years in terms of how that UK Government industrial strategy impacts on our ability to identify growth sectors and interlinks through that?”
To do this effectively will require more resourcing of institutions like Business Wales. Following a transition period EU programmes’ funds came to an end in 2023, with Business Wales’s core funding scaled down from £30m to £22m. While strategic realignment to funding cuts appear to have had some useful efficiencies (and avoid duplication at local level business support), there were concerns from some our interviewees, with one respondent noting that “if you scale down funding anywhere any further, you scale down everything to a digital offer only, you only get certain things out.”
Given business support will be vital in supporting businesses around UK policy initiatives, FSB suggest that in value for money terms, there is an argument to scale up funding. In terms of the need to support supply chains and capacity building in order to ensure value from industrial strategy and big investments in Wales there may also be a case that UK funding alongside Welsh funding should also fund SME support initiatives to its industrial strategy and Small Business Strategy going forward. This would fill the gap previously covered by EU funds for regional economic policy and should look to scale funding and activities up, in real terms, to those in place before leaving the EU. Business Wales has faced significant cuts over the last decade. If it is to take on more responsibilities (such as on developing supply chains), it should be well resourced to do so.
As this report was being finalised, announcements were being made by the US administration in relation to trade tariffs, creating significant uncertainty in relation to the future of global markets. While the situation is too uncertain to include analysis in this report, it indicates why it is important to have a stable business support system that can to respond to shock economic events, and to develop and provide advice and resources for businesses in a changing export market with increased instability. Again, it is important that the value of Business Wales’s services are understood in full by policy makers as important advantages in uncertain times.
• The Welsh Government should restore funding levels for business support in Wales in real terms to those in place before leaving the EU, and commit to multi-year budgets.
• The Welsh Government should work with Business Wales to direct additional resource at a targeted account management function which would provide specialised and intensive support – such as tailored mentorship, access to growth finance, and innovation and technology adaptation
support – to SMEs with a clear ambition and potential to scale up their business in order to address ‘Wales’s missing middle’.
Bringing In Local Business Support
Business Wales noted in their interview that “there will always be an element where there’s certain things you need to do in a local level that we couldn’t do through a Pan Wales service.” It is identifying those ‘certain things’ that is important, and it is important to understand their value for SMEs, and how they link to the wider picture.
While it appears that the ‘front of door service’ has become more complex, there were some positives and learning to be taken from this too, expressed around a greater role for local authorities to shape the programmes locally, as one business consultant noted to us:
“In my opinion there’s been some positives about the way things like the levelling up funding was distributed via local authorities because it allowed a local input and imprint and say to be put on the distribution of funds and probably more businesses in some of the local authority areas have been able to access grants than were even previously aware of them because of the local communication channels. So, I think it’s been a positive.”
The same respondent noted that Merthyr Council had been effective in ‘bringing businesses to different type of forums’ and ‘put their business on to a firmer footing.’
Some local authorities have reacted positively to the challenges of ensuring SPF supported SMEs and learning and impact at this level needs to be retained and brought into any future frameworks. In particular some projects were able to gear effectively towards SMEs and in some places the funding has facilitated the development of useful networks for small business owners.
In many ways, this view also reflects wider feelings across some interviewees that ‘local level business support’ is undervalued, as one provider put it:
“The roles of organisations like us I don’t think get the recognition it deserves
… we go under the radar because we do it naturally. Then you’ll bring these organisations, groups, projects, or enterprises together, but suddenly it’ll be someone else who claims the credit because they went to that later meeting where networks were established. Well, yeah, wind back a couple of months - they weren’t even talking to each other. And now you’ve got a suite of enterprises or local businesses coming together, and it’s this footprint.
…[what] we want is acknowledgement. The capture and the measurement of that perhaps we can do better.”
As well as being embedded in local areas, there is a better understanding of where a business impacts on local markets:
“For us, you flip it, we know the locality, we know the supply chains of someone who comes to us. But sometimes we may not be that best person to actually take them on that journey. We always then signpost.”
In recent research reports, FSB Wales have noted how network building has been important on Skills, Manufacturing and Creative Industries. 38 Examples we had encountered in those reports include the appreciation for networks built at little resource through Creative Wales. Regional hubs have allowed businesses brought into those networks to work together for larger contracts that would not otherwise be possible separately, and business had a better central point to access skills support, compared to SMEs not linked to such hubs.
Previous FSB reports show the role that hubs have in networking and its impact for coordinating projects. However, our interviews noted how hubs can have a role in coordinating and steering toward new projects directly, providing HR support, and creating opportunities and shaping markets. This was at both the ‘high growth and innovation’ part of the spectrum, but also in terms of more ‘community wealth oriented’ networks:
“it’s the wrap around service that makes it happen. So that’s why it’s been a success.
… It’s more than signposting, it’s beyond signposting…We will scan [contract service] Sell2Wales every day, and we will then match those opportunities with tenants, but not only pass them on - we’ll ask “do you need help to write that tender? Can we proofread it for you? Here’s a research call that’s just come out from Innovate UK. Do you want to tender for it? Can we help with that kind of innovation? Can we create teams with you? we’ll manage it!” … [and] securing that funding into Wales it achieves our strategic objectives.”
Another example is Planed as a network of food producers, which also undertakes a coordinating role and creates opportunities and markets.
“...our projects and activities cover a broad range of themes, which are again peoplefocused but very much with our kind of economic socio-economic well-being thread all the way through… We have a network ourselves which has over 80 Members
38 L ap Gareth, E Crawley, K Marshal, B Wilmott, A Skills-Led Economy for Wales (FSB:2024); D Pickernell ‘Manufacturing Momentum’ (FSB / Swansea University: 2023); L ap Gareth ‘The Power of Creativity’ (FSB: 2024)
currently - small businesses, local growers, producers, suppliers.
We have also our work on commercial side in terms of food, which is the community vending machines funded by Welsh Government. Expensive to purchase and to build but very effective in terms of supporting local enterprises in terms of a sustainable and additional source of income which no longer requires them to stand in a farmers’ market for six hours in the rain to make £30. Now they can supply a machine, and you know they can turnover a couple of £100 or £1000 depending on the product and the volume.”
Both these examples show the value of ‘shaping markets’ for that network to develop and build on new opportunities. Such a coordinating role is important and maximises what already exists in terms of bringing groups together towards new opportunities.
While its focus is more specifically on social enterprises, Cwmpas noted their support for hubs as a means to both build and coalesce networks, but also to provide long term strategy:
“We need investment in capacity for a cooperative development hub in Wales – a pro-active body tasked with identifying opportunities for new co-operative and social businesses in communities, supply chains and emerging sectors and supporting their formation by bringing relevant people and organisations together.
Whether that’s working with universities to develop co-operative spin-offs, working with sole traders to build co-operatives to decarbonise our housing stock, or working in the agricultural sector to build the next generation of food co-ops – we need capacity for specialist co-operators to identify opportunities and turn them into action.”
There are a number of groups that serve different constituencies, such as Farming Connect, Industry Wales, and Social Business Wales. To a greater or lesser extent, these loosely fit under the umbrella of the Business Wales brand. Analysing all these went beyond the scope of this research, but we did receive comments from Cwmpas as an example of this wider network, who are a lead partner (others include WCVA, Development Trusts Association Wales, UnLtd and Social Firms Wales) in Social Business Wales, which focuses on setting up and supporting social enterprises providing they get free guidance at every step. It was good to know that the interviewee viewed themselves as in the ‘Business Wales family’ and ‘has positive relationships with colleagues in Business Wales, working together strategically to deliver the best service possible to clients.’
Examples of effective local and regional network building with little resource have been seen through Creative Wales’s networks, aligning the work through hubs such as M-SParc and Yr Egin. Our recent Creative Industries report noted how this was appreciated by creatives, and could be replicated, and provided with more resources.
Not all areas are served by the same resources and hubs, and what they need will be different (a West Wales food network would look quite different in South East Wales). What is key is that local networks and Business Wales work effectively together so that businesses are able to access seamless support, no matter what their entry point into the business support ecosystem. The business seeking support shouldn’t see the wiring behind the system, but rather be directed effectively to the best source of support for them, be that a local or a national service. Consistency and clear remits from all actors in the system is key to ensuring this smooth user journey.
Local authorities are best placed to be empowered to identify named local networks and so to be tasked with identifying and listing named partners to facilitate referrals for business support.
• Local authorities should work with Business Wales to deliver local business network development strategies, and identify and develop a list of named partners to facilitate referrals for business support, to complement Wales wide business support provision.
Given the importance of local networks, both for providing local support and peer-to-peer networks
in referring where appropriate to Business Wales, effective operation of the system relies on businesses across Wales being able to access local, trusted and effective intermediaries and signposts. There is a role here for the Welsh Government in terms of the continued development of place-based policies, particularly for rural and urban deprived areas, and ensuring that the mapping exercise we have recommended they undertake of business support identifies and addresses any gaps in access to more local support.
For the Welsh Government, effective local business support groups and networks can also offer a significant advantage by serving as a valuable resource to be used to understand local and regional economic needs. When looking to develop economic strategies and set evaluation metrics, the Welsh Government should utilise these networks as a foundation for better local data collection and understanding of local market needs across economic, environmental and social aspects.
Business Support – a Remit for all SMEs and Entrepreneurs
An ongoing but avoidable risk is that there could be a two-tier system with an overweighting toward one aspect of SME support and away from others unless it is made clear by UK and Welsh Governments that both are important to economic success and vision.
Different types of businesses are treated differently in the current system and often with good reason. This can be seen in terms of the level and quality of engagement in different parts of the system. It is acknowledged in Business Wales interviews that “on that innovation escalator, we would say the higher you go up, the more it goes from more digital to more faceto-face” - this is justifiable as companies that go up the ‘innovation escalator’ have more complex problems and issues to resolve as workforce issues and capacity needs heighten, and more bespoke advice is required.
The following notes the general strategy to balance the resources and a capacity and needs of SMEs:
“To service every business in Wales is quite complex. We just simply do not have the resource to do that. So, there was a drive in this round of programme activity to focus in on digital first, where we tried to encourage
businesses where possible to use digital information and guidance...We do quite a lot of ‘one to many’ activities as well where we know there are key challenges businesses are facing and that also access it from a digital sense. You know it acts as a really strong way to engage…We’ve reflected that we probably need more faceto-face, but then the digital blend works well for people as well…where we’re doing more 1 to 1 activities where resources are tight, you know genuinely you can do a lot more interventions digitally than you can if you’re travelling to meet people. So, we’ve seen some productivity increases in terms of the advisor time.”
This is an understandable approach where resources are tight, diverse needs require distinct levels of bespoke engagement, and there is bound to be certain targeting towards growth-oriented firms. It is better to provide advice across many firms than too few, to hedge bets on effectiveness, and to target in key priority high growth areas for impact on bespoke support. But there is a need to ensure that the remit for developing firms is one that is for SMEs across all communities. Targeting key priority high growth areas must not ignore rural businesses and by default rely on existing city and town centre hubs. Business support should ensure coverage includes vital functions and support for small businesses in all geographies and sectors.
In response to this question, Business Wales noted the need for a balance in this regard to ensure that any sectoral focus in industrial strategy was not inadvertently disadvantaging some areas:
‘For accelerated growth probably 40-50% of the business will be in those high growth sectors [reflected in industrial strategy]. Whereas when I look at the business development service, it’s probably only about 20% because they also have a policy remit from Welsh Government to focus on more foundational economy businesses such as High Street businesses. So, there’s a balance. The UK Government’s also looking at a small business strategy and
it’ll be interesting to see. Business Wales will probably play a part in both of those strategies.’
This reflects the current remit and it is important that signals from the top – and resources to fund the service – remain in place in giving due importance to all parts of Business Wales’s services and remit to all SMEs across all areas of Wales, and how they are important to community wealth and business survivability.
It is important to ensure that UK development of an industrial strategy and Small Business Strategy – and the way they are then shaped in Wales – are treated as vital interventions, and that where Business Wales is tasked to support them that it is adequately resourced to take on these additional responsibilities and programmes equally. Both need to be shaped to Wales’s needs and the business support system can play a vital role in support of those aims. The remit is to all SMEs in Wales and that must continue.
• It is important that the wide range of business services are supported and valued by Welsh Government and resourced accordingly. A welcome focus on high growth should not lead to under resourcing of other vital functions and support for SMEs that are vital in their communities.
Speeding Up Process and Digitalisation
Digitalisation should be seamlessly woven into Welsh Government’s strategies to ensure business support addresses the needs of firms across Wales. This will demand substantial investment in advanced data processing, analytics, and cybersecurity capabilities within Business Wales and the Development Bank of Wales.
Our UK survey for our ‘Redefining Intelligence’39 report provides useful data to understand sentiment amongst SMEs towards digital and AI when it comes to remaining ahead of the curve. It is a matter of fact that bigger companies have the resource to invest in advanced technology methods and so there is a continued need to support SME innovation to invest in tools such as AI, helping reduce cost and remain agile against major competition. Digital Strategy Wales should maximise the potential to improve access to business support by identifying the opportunities to use these systems for the business support ecosystem itself to adopt.
39 C Russell, ‘Redefining Intelligence’ (FSB: 2024), available at https://www.fsb.org.uk/resources/policy-reports/redefining-intelligenceMCKHTFHSTCMVGF5BPKCDHVF73FGU
While many associate ‘digital first’ as replacing human functionality in a business, the focus is on improving front facing roles by reducing the impact of backoffice admin or labour-intensive maintenance through digital infrastructure already in use by businesses and organisations of all sizes. It should be noted that the ability to take advantage of AI will be shaped by how effective introduction of digital infrastructure has already happened, with other small countries currently in a better position due to historical investment. This persistent gap in Wales puts at risk the potential for growth in the Welsh economy.
Other small nations such as Estonia and Denmark who have directly worked on frameworks such as government led digital infrastructure strategies across their public sector, provides a model that transfers seamlessly between public sector/ business interfaces. It is important therefore that developing business support digital infrastructure works alongside the wider public sector digitalisation and AI processes. International best practice should be followed and small nation models used to guide strategy in Wales.
As noted in the previous chapter, of the businesses we surveyed, 58% of firms told us that through the support they receive, the quality of services is either good or very good. This compares to a 50% satisfaction rate for the Development Bank of Wales and 53% for local authorities. However, we noted issues raised around bureaucracy and slowness of services and how they did not align to private sector’s needs for swift support. Digitalisation strategy – built to ensure that personal contact is interwoven – can help address these issues.
Some also suggested advisers did not have enough business experience. Some firms noted that they felt they had poor advice. It should be noted that it remains the case that our survey had generally positive ratings for Business Wales, but there is clearly a need to ensure there is resource for effective delivery and to address some concerns raised on this interface with businesses and the business support system.
Some of the issues in that interface are made simpler through a clearer economic strategy and less fragmentary system that makes providing central advice more complex, but there also needs to be direct action around training and expectations on timeframe for responses and engagement. These frustrations are keenly felt by firms affected and the responses suggest that unsatisfactory experiences (even if a minority) will impact on the likelihood of businesses accessing future support. As such, all business support institutions need to address these issues as a matter of urgency.
On the wider differing timelines between public sector organisations and businesses, this can be helped through strong leadership who push on these factors. One hub we interviewed worked to ensure that time lags between academia and enterprise were less keenly felt by businesses:
“People who have tried to access business support and it hasn’t been effective, and they’ve been burnt, seen it as waste of time, haven’t bought in to the process as it was cumbersome. So, we found you get 1-2 or at best, 3 bites at that cherry, and they’re gone. They won’t come back. So, the service has got to be mint.
We’ve set up a CRM system to track who’s doing what, how quickly we work with the companies and so forth. So, trying to tackle that. We’re also mindful for our partners that they that they’re mindful of that effect. [Named University] for example, if we’ve got a research project, there needs to be a response, a prompt response to industry and that’s been a failure in the past.”
Business hubs with a foot in both camps can work in partnership with public sector, and Welsh Government can support building new digital processes to make for a better and quicker, more integrated system.
• Business Wales should implement a digitalisation strategy focused on speeding up the interface for support, reducing bureaucracy and ensuring quicker timescales and responses for businesses.
• All Business Support bodies should review their response times and ensure a strategy is in place to improve the process of sharing timescales with businesses.
• Any digitalisation strategy should align with wider public sector digital infrastructure where possible to support businesses as well as citizens’ access. International best practice (such as Estonia and Denmark) should guide strategy.
Skills and Business Support
One area that came up – often indirectly - was skills; access to skills and the links to the skills system. Our research suggests that skills is often indirectly linked to business support, which needs to change.
This was acknowledged as part of their remit by Business Wales, but also that this role of their remit was often not understood:
“Business Wales also leads on things like the employer engagement on skills and employment, because very often they can get lost because there’s multiple training - I think there’s 33 different training providers. It does get quite complex for them. But some of those things almost go unnoticed. People aren’t aware business Wales are doing that.”
This is part of the remit of business support that needs to be better understood and marketed, but there needs to be a clear alignment of skills strategy and system with business support. Some concerns were raised by interviewees on the entrepreneurial side that focusing funding through universities could lead to activity geared more toward university-weighted ends than helping the businesses themselves:
“Throwing money at academics to produce a glossy kind of thesis and report is the answer to everything… Why is that [funding] not going to community organisations, that are more embedded and planted? Organisations and groups who are actually delivering in communities, I think that’s the key. What you need is a delivery focus lens rather than an academic focus and lens.
There’s a role for academics in terms of supporting what comes out of it, and I think it’s that the balance is wrong at the
moment - the academics are driving the kind of the policy and the agenda and then the community organisations then have to respond. Actually, it should be the other way around.”
The academic literature around the entrepreneurial ecosystem notes that such problems are par for the course as different institutions (government, universities, entrepreneurs, investors) all have different pressures and have different outcomes. This was not an area of focus for our report, and so the evidence here is limited. However, this is a perception that should be investigated. We have also seen good practice in hubs that provide links to – but are at a certain arm’s length from – educational establishments and governments, as being useful ways to provide that space for negotiation across the key actors and steer all toward those practical economic outcomes. As we found in our recent skills report, there is a need to better align skills support to business support. There are good examples of good practice, often based around hubs and networks, but there is a need for a more structured alignment between the business support and skills support systems.
• Business Wales should deliver a marketing strategy aimed at ensuring businesses are aware of the support they can access to address skills gaps within their workforce.
• Medr, RSPs and other coordinating bodies should view this as a priority area of work to ensure SMEs gain access to skills and are helped to navigate the system. The remits and roles of these new skills bodies should be aligned to the wider business support strategy going forward.
This would not be a concern if businesses were accessing skills support through other means, but findings from our previous Skills report suggests that patchy engagement between SMEs and the skills system is a concern. While our findings were not conclusive, some interviewees felt that work led by universities could be too academic led, rather than focus on practical outcomes for the areas. However, there were also good examples of hubs and spaces aligned to universities being geared directly toward business and innovation.
• Using these best practice models that provide an autonomous space for business and education institutions to work on equal basis, HE and FE can better provide a space for entrepreneurial spinoffs, innovation and marry their expertise with those of entrepreneurs and community groups to ensure clear practical benefits.
Many interviewees noted the productivity gap in Wales and noted the vital role skills can play in addressing this (alongside other factors such as access to finance), so there is a will to improve the alignment between business support and skills support.
• Any productivity and growth strategy should look to better align skills and business support mechanisms and strategies as a priority, and build shared partnerships with clear shared outcomes toward that end.
Kevin Baker
Tyre Glider
Conclusion How’s the Water?
A central idea in the work around entrepreneurial ecosystems and its variants is that entrepreneurship can be tended, can be built, and that entrepreneurship is not an intrinsic quality that individuals have or not, but can be learnt. As such, the quality of the systems to help drive entrepreneurship, in making that option easier, and to provide the right environment to thrive is important.
Ecologies are by nature different from each other, and what works in one place may not in another, dependent on particular culture and histories, development, relative strength and so on all being part of the puzzle. But as the literature teaches us, there are commonalities to success, and a need for a common approach across the piece to be able to do so.
As one academic put it, entrepreneurs in areas such as Silicon Valley may often attribute success to themselves, comparing this to when a fish is told it is thriving because of water – to which the fish replies ‘what is water’. In this reading, the environment around a successful business can be taken for granted. This is also a mistake made by policy makers, where the need to ‘tend’ the environment is often unappreciated.
Similarly, in Wales, many assumptions are made about entrepreneurship, business and economy, but nothing is fixed, and the environment is far from inert. On the contrary, our engagement with SMEs shows a pool of ambitious, embedded businesses who could be harnessed to support a drive for growth in Wales.
The question becomes how do we bring together the strengths across policy areas and institutions to gear ourselves to build those businesses and to create an environment that supports businesses to thrive? As many interviewees noted, often the answer is already out there, and the main thing that is needed is to make the connections, to bring the businesses and different parts of the system together to provide new opportunities.
To further push the metaphor, to gauge how we are supporting and growing our businesses, and lowering barriers to success within the entrepreneurial ecosystem in Wales, we should be asking the equivalent of ‘how’s the water?’, until we are able to say ‘well, the water’s very nice, actually!’
We hope that our work and recommendations form a part of the work toward that supportive environment for businesses for the future.
Appendix
Methodology
To get both a breadth and depth of analysis on perceptions of, experience of and aspirations for business support in Wales, we used a mix of quantitative and qualitative methods to build our insights. Together these provide an overview of SME experiences and allows for us to understand the wider general experiences, alongside more in-depth understanding of individual case studies from different sectors.
Quantitative Data - Survey
We conducted a survey, open from November 2024 to January 2025, asking questions on experience of business support, and views on quality of service. These looked at which type of support was accessed, whether and how it helped the business, the engagement experienced and desired, and aspirations for business support for the future.
The survey received 113 responses.
By size, the sample included 79% micro businesses (0-9 employees), and 16% small (10-49), 3% 50+, 1% (250+). Compared to the demographics for active businesses in Wales40, ‘small’ business (10-49 employees) are particularly overrepresented relative to ‘micro’ business, which is likely explained by the focus of the survey on those with active experience of business support with those relatively larger businesses likely to have accessed support to grow, and so were more likely to take part.
Given that DBT’s Small Business Survey estimated the percentage of firms accessing external business support at 27% in 202341, we would not expect the demographics to this survey to match the wider general business population.
By Sector, the survey asked on basis of SIC codes, and a broad sample was produced. The largest samples were ‘professional, scientific and technical services,’ ‘wholesale and retail,’ and ‘accommodation and food,’
which fits with the representation of FSB membership, although professional services are overrepresented compared to wider demographics, again likely due to the subject area. A number put ‘other’ as their spanning across sectors did not fit neatly, and/or they did not see themselves represented in the SIC options.
The geographical spread included responses from all 22 authorities. Pembrokeshire and Carmarthenshire were relatively over represented but there was broad geographical representation across Wales.
The gender of business owners skewed two-thirds male. This reflects the wider demographics– latest figures place Female entrepreneurs as making up only 32.3% of the UK’s smaller business leaders.42
The age range of business owners skewed older, with only 23% of respondents being younger than 45. This broadly tracks with what we know of business owners. Enterprise Nation’s most recent Small Business Barometer found that the average age of the UK’s business founders was 46, and that 35% of businesses are started and run by people over 50. When accounting for the age of businesses averaging 8 years (according to Companies House data), this is unsurprising.
In terms of ethnicity, 97% of our sample were white. This lack of diversity is disappointing as a response particularly in areas with most ethnic diversity in Wales (such as cities). The ONS has estimated that in 2021 around 12% of UK self-employed business owners identified as being from a minority ethnic group. While the Uk Government’s Small Business Survey estimates 7% were led by people from a minority ethnic group in 2023. Welsh Government analysis notes that 2.7% of SME employers in Wales were Minority Ethnic Groupled, which is the lowest in the UK. As such our survey sample appears to match wider estimates for Wales. However, this still illustrates that in future FSB Wales need to do better to build ethnic diversity into our research planning and dissemination.
In terms of disability, 16% said they had a condition which impaired them ‘a little’ or ‘a lot.’
40 Latest Welsh Government figures have the following breakdown: 94.6% micro business, 3.8% small, 0.9% medium, 0.7% large business, data from ‘Size analysis for active businesses in Wales 2023’ available at https://www.gov.wales/sites/default/files/statistics-and-research/2023-12/size-analysis-of-activebusinesses-in-wales-2023-165.pdf
41 https://www.gov.uk/government/statistics/small-business-survey-2023-panel-report/small-business-survey-2023-panel-report
42 British Business Bank figures, available at https://www.british-business-bank.co.uk/business-guidance/guidance-articles/business-essentials/overcomingchallenges-female-entrepreneurs-face
The sample is broadly representative and alongside the wider research, provides a useful understanding of SME sentiment from those who have used the business support in Wales, and so fulfils the aims of the research for this report.
Qualitative data
Interviews
We conducted 9 in-depth interviews with SMEs during November and December 2024, which were a mix of different sectors, including tourism, manufacturing, creative industries, transport and professional services, and these were from different parts of Wales. Some of the latter also served to provide insight into the role of business support providers.
These provided more granular understanding of experiences of the business support system and how the support helped those businesses, which interventions they found successful, and which were less so, providing for stories that were less easily captured in the survey. The interviewees have been anonymised to ensure that they felt able to speak honestly.
On the provider side, we conducted 10 interviews. We conducted on the record interviews with Business Wales and the Development Bank of Wales. However, we also conducted several off the record with various staff for sensitive insights that have then been reflected confidentially in this report. We also conducted interviews with distinct parts of the system, including those delivering on contracts, dealing with ‘high growth and innovation’ side and business consultants and challengers providing bespoke private support, and some elements of Business Wales support. These interviewees have also been anonymised to ensure respondents confidentiality where possible.
Glossary of Acronyms
• Small and Medium Sized Business – SME
• Federation of Small Businesses – FSB
• Organisation for Economic Co-operation and Development - OECD
• Office for National Statistics - ONS
• Shared Prosperity Fund – SPF
• Development Bank of Wales – DBW
• Corporate Join Committee - CJCs
• Welsh Development Agency – WDA
• The Business Wales Accelerated Growth Programme – BWAGP
• Virkemidler for Regional FoU og Innovasjon/ Instruments for Regional Research and Innovation –VRI
• European Regional Development Fund – ERDF
• European Social Fund – ESF
• Net Promoter Score – NPS Index
• UK National Wealth Fund - NWF
• British Business Bank – BBB
• Higher Education & Further Education – HE & FE
• Lesbian, Gay, Bisexual, Transgender, Queer - LGBTQ
• Regional Skills Partnerships- RSPs
• Key Performance Indicator – KPI
• Research and Development – R&D
• Gross Domestic Product – GDP