Lending Drops but Business Confidence Improves, According to Economic Intelligence Wales Annual Report

Economic Intelligence Wales has published its sixth annual report, examining and analysing economic trends in 2023/24.

The report is produced by Cardiff Business School as part of the Economic Intelligence Wales research collaboration between Bangor Business School, Cardiff Business School, the Office for National Statistics, the Enterprise Research Centre, and the Development Bank of Wales.

The findings reveal a decrease in the proportion of businesses across the UK accessing external finance, along with a continued drop in lending to Welsh small businesses during the latter half of 2023. The number of equity deals also fell across the UK, with the total for 2023 down by a quarter compared to the previous year.

However, there is a silver lining as business confidence improved. According to the Federation of Small Businesses’ UK Small Business Index, confidence saw a return to positive figures as inflation dropped, following nearly two years of negative sentiment among small businesses.

Other key highlights from the report include:

• 43% of Welsh businesses surveyed believe their performance will improve in the next 12 months
• In the first quarter of 2024, UK GDP was estimated to have grown by 0.6%
• The domestic economy remains the top concern for small businesses as a barrier to growth
• Business deaths in Wales continue to exceed business births
• Concerns around falling Welsh exports could have large impacts on the Welsh Index of Production

The report also reviews the activity of the Development Bank of Wales, which in 2023/24 made over 490 investments across Wales, totalling £125 million. More than half of the investments made by the Development Bank during this period, across both debt and equity funds, went to micro-businesses.

Ken Skates, Cabinet Secretary for Economy, Transport, and North Wales, commented:

“The insights drawn together by Economic Intelligence Wales help inform not only the work of the Development Bank of Wales but are a resource which supports a shared understanding of business and business needs in Wales.

The report reflects the positive impact of the Development Bank of Wales in supporting businesses in Wales to start-up and grow throughout 2023/24; a year which saw a strong performance from the Bank despite the wider economic challenges.”

Giles Thorley, Chief Executive of the Development Bank of Wales, added:

“It’s been a very difficult couple of years for businesses across Wales, and the drops seen in both equity and lending more generally were to be expected while wider economic circumstances remained unsettled. But it’s good to see that businesses have renewed cause for confidence as inflation has dropped – that’s a much-needed shot of optimism after some hard times.”

“I’m also pleased that the Development Bank of Wales was able to step in and support Welsh businesses—particularly in the case of smaller businesses, where more than half of our investments went in 2023/24.”

Professor Max Munday of Cardiff Business School, one of the report’s authors, said:

“The annual report again shows the significance of Development Bank of Wales activity, with investments in this 2023/24 financial year connected to around 3,400 new and safeguarded jobs, and with micro-sized businesses continuing to gain a significant share of new funding. The wide range of projects in which the Development Bank is engaged, across sectors and infrastructure, is especially encouraging.”

The Economic Intelligence Wales report continues to be a vital resource for understanding the evolving economic landscape in Wales and the role of the Development Bank in supporting businesses through challenging times.

Economic Intelligence Wales has published its sixth annual report, examining and analysing economic trends in 2023/24.

The report is produced by Cardiff Business School as part of the Economic Intelligence Wales research collaboration between Bangor Business School, Cardiff Business School, the Office for National Statistics, the Enterprise Research Centre, and the Development Bank of Wales.

The findings reveal a decrease in the proportion of businesses across the UK accessing external finance, along with a continued drop in lending to Welsh small businesses during the latter half of 2023. The number of equity deals also fell across the UK, with the total for 2023 down by a quarter compared to the previous year.

However, there is a silver lining as business confidence improved. According to the Federation of Small Businesses’ UK Small Business Index, confidence saw a return to positive figures as inflation dropped, following nearly two years of negative sentiment among small businesses.

Other key highlights from the report include:

• 43% of Welsh businesses surveyed believe their performance will improve in the next 12 months
• In the first quarter of 2024, UK GDP was estimated to have grown by 0.6%
• The domestic economy remains the top concern for small businesses as a barrier to growth
• Business deaths in Wales continue to exceed business births
• Concerns around falling Welsh exports could have large impacts on the Welsh Index of Production

The report also reviews the activity of the Development Bank of Wales, which in 2023/24 made over 490 investments across Wales, totalling £125 million. More than half of the investments made by the Development Bank during this period, across both debt and equity funds, went to micro-businesses.

Ken Skates, Cabinet Secretary for Economy, Transport, and North Wales, commented:

“The insights drawn together by Economic Intelligence Wales help inform not only the work of the Development Bank of Wales but are a resource which supports a shared understanding of business and business needs in Wales.

The report reflects the positive impact of the Development Bank of Wales in supporting businesses in Wales to start-up and grow throughout 2023/24; a year which saw a strong performance from the Bank despite the wider economic challenges.”

Giles Thorley, Chief Executive of the Development Bank of Wales, added:

“It’s been a very difficult couple of years for businesses across Wales, and the drops seen in both equity and lending more generally were to be expected while wider economic circumstances remained unsettled. But it’s good to see that businesses have renewed cause for confidence as inflation has dropped – that’s a much-needed shot of optimism after some hard times.”

“I’m also pleased that the Development Bank of Wales was able to step in and support Welsh businesses—particularly in the case of smaller businesses, where more than half of our investments went in 2023/24.”

Professor Max Munday of Cardiff Business School, one of the report’s authors, said:

“The annual report again shows the significance of Development Bank of Wales activity, with investments in this 2023/24 financial year connected to around 3,400 new and safeguarded jobs, and with micro-sized businesses continuing to gain a significant share of new funding. The wide range of projects in which the Development Bank is engaged, across sectors and infrastructure, is especially encouraging.”

The Economic Intelligence Wales report continues to be a vital resource for understanding the evolving economic landscape in Wales and the role of the Development Bank in supporting businesses through challenging times.