Equity finance as a driver for economic development in Wales
14 June 2022
The role of equity investment in driving post-pandemic economic recovery was the subject of a recent Breakfast Briefing at Cardiff Business School.
Mike Owen, Group Investment Director, and Siân Price, Research and Partnership Manager, from the Development Bank of Wales, joined us to discuss the current landscape for Welsh SMEs and the role of equity investment in supporting Welsh businesses.
Mike began by introducing the work that they do: “The Development Bank of Wales is a wholly-owned subsidiary of the Welsh Government created 5 years ago based on its predecessor, Finance Wales.
“We are more than just investing direct into businesses. The vision is a unique resource for Wales, all about long-term value and all about investing the cash and getting it back so we can reinvest that cash in future generations of Wales businesses.”
He explained what they have on offer to Welsh businesses, ranging from micro loans of up to £50,000, to large business loans of up to £10 million. They have also recently began investing in property development with small property developers in Wales.
During COVID-19, the Development Bank of Wales invested £92 million in three months to support businesses. This has continued to grow, with them investing £110 million in the year ending March 2022.
Siân Price then took over to introduce Economic Intelligence Wales: “Economic Intelligence Wales (EIW) launched in June 2018. It’s a research collaboration between the Development Bank of Wales, Cardiff Business School and the Office for National Statistics.
“Since its launch, EIW have been publishing quarterly and annual reports. These are written by the Welsh Economy Research Unit here at Cardiff Business School, led by Professor Max Munday.
“These quarterly reports track macroeconomic and Welsh SME market finance data as well as data on the Development Bank’s own investment activity and impact. The frequency of the reports has enabled EIW to track the pandemic as it evolved, as well as the impact of UK and Welsh Government support schemes, and they’ve helped embed EIW’s reputation amongst policy influencers and policy officials as they provide regular recurring Wales-level data and analysis.”
Speaking on the latest report, Siân said: “The optimism that was being experienced at the end of 2021 has dwindled with a worsening outlook for the economy in the early months of the year.”
Findings from the recent June report included:
- GDP recovering to above pre-pandemic levels
- Further tightening of labour market conditions in the UK, with high levels of vacancies and unemployment rates falling
- Wales had one of the lowest unemployment rates in the UK in the three months to Feb 2022, at just 3%, compared to 3.8% in the UK
- Inflation at a 30-year high and set to hit 10% by the autumn as the war in Ukraine drives up fuel and energy prices.
Moving on to the SME picture in the UK and Wales, she reported that the value of Welsh exports increased to £15.2 billion over the year to December ’21, with a value of goods imports increasing to £16.1 billion over the same period.
However, there are concerns that a number of small SME exporters are ceasing to trade with the EU due to rising fixed costs, and there’s evidence of falling number of UK-EU trading relationships between buyers and sellers.
Siân said: “SMEs in Wales are concerned about rising costs, with 37% revealing they’ve been significantly impacted by increased costs in the year to quarter 4, 2021.
“In terms of SME finance, bank lending has returned to levels seen prior to the pandemic with £20.46 billion of bank lending into SMEs in Wales in the year to quarter 2. It’s estimated that 0.6 million small firms across the UK borrowed for the first time during the pandemic according to the British Business Bank.”
Mike then took the opportunity to explore the different opportunities and options that businesses have when working with the Development Bank, along with the strategies that they have and the ways in which they support businesses.
Cardiff Business School's Breakfast Briefing Series is a network of events, which enables business contacts to find out more about the latest research and key developments from industrial partners.