PROFESSOR DYLAN JONES-EVANS

This week, the long overdue Levelling Up White Paper was published by the UK Government. Weighing in at 332 pages, it is a substantial piece of work that puts forward the case for addressing the economic inequalities across the UK.  Naturally, some critics have already suggested that it long on ambition and short on the funding needed to achieve that ambition. Nevertheless, it must be applauded for at least getting this important issue front and centre when it comes to government policy and also on identifying a number of broad objectives to ensure a more equal distribution of economic prosperity in every part of the United Kingdom.  These include boosting productivity, pay, jobs and living standards by growing the private sector (especially in those places where they are lagging) as well as spreading opportunities and improve public services in the weakest regions. By adopting a bottom-up rather than the usual top-down approach, it also intends to restore a sense of community...

One of the most significant economic and social changes during the Covid-19 pandemic was the acceleration towards the adoption of digital services in both the public and private sectors.  Online meetings via platforms such as Zoom became the norm as did ordering and paying for food via apps on a night out. And as banks limited their services during lockdown, the increase in the use of digital payments for everything from ordering online to tapping a console when paying in a shop continued to grow. Yet despite all of this technological change, research showed that over 8 million people in the UK (or 17% of the population) still have difficulties living in a cashless society. More relevantly, this issue was not related only to the challenges of Covid as smaller communities across the UK had borne the brunt of the restructuring of the banking sector with estimates that nearly 5,000 branches had been closed since January 2015. Even prior to the pandemic, dealing with the issue had been...

Looking back over the period since the pandemic began, possibly one of the most iconic memories for me was clear blue skies with no aircraft trails to be seen anywhere.  In fact, it got to the stage, with aeroplanes grounded across the World, that seeing a long white line moving across the sky – usually a cargo plane – became a rare phenomenon rather than an everyday occurrence. The fact that people were not travelling abroad and staying at home within their own countries meant that the environment improved across the World. There were news reports about smog disappearing in some the World’s most polluted cities and fish returning to rivers and waterways such as the canals of Venice. Given this, there was hope that the world may have turned an unexpected corner on climate change with one academic journal suggesting that global carbon dioxide emissions had fallen by 17% in April 2020 as compared to the previous year. Unfortunately, as economic activity has started again, that drop h...

For the business community in Wales, this week’s budget did not have anything that had not been discussed in the press in the prior few weeks with one notable exception, namely the announcement that there would be a new £130m fund, to be delivered by the British Business Bank, to support ambitious Welsh firms. For those of us who, for years,  had been calling on the British Business Bank to make this type of funding available to the business community in Wales, it was a surprise as there had been indications over the years that officials within the British Business Bank were not convinced by the case for any substantial investment.  In fact, I remember an event in London shortly after the publication of my access to finance report for the Welsh Government in 2013 which had demonstrated, unequivocally, that Wales had been largely ignored in terms of the provision of venture capital by the British Business Bank.  Speaking to one of its senior officials, I tried to make the ...

  Developing a competitive knowledge-based economy usually requires two important elements namely entrepreneurs with ambitious businesses and a strong investor base that can provide the vital equity funding that can turbo boost the numbers of growing firms that can create wealth and employment The degree to which these two factors impact on the different nations and regions of the UK is the subject of an excellent new report from the British Business Bank entitled “Regions and Nations Tracker: Small Business Finance Markets 2021”. Drawing on information from data specialists Beauhurst, it shows that there have been nearly 15,000 private external equity deals small and medium sized enterprises (SMEs) across the UK.  It proposes that at the heart of developing high growth businesses and a positive environment for investment is the relationship formed between the investor and the companies. Most important of all, the entrepreneur must be as happy with the investor as the investor...

Over the next few weeks as we approach the Senedd elections in May, many organisations will be putting forward ideas on how the next Welsh Government can make a difference to the nation. Given the importance of new and smaller businesses to the Welsh economy as we emerge out of the pandemic, our next group of politicians should read the recent proposals from Purple Shoots, a not-for-profit micro finance organisation that provides small business loans at fair rates. With an impressive track record over the last seven years, they have helped to fill a real gap in access to finance to the newest and smallest firms and, in doing so, have made a real difference to the ambitions of those from the poorest communities who want to start their own businesses. One of their suggestions is to divert one per cent of the £270m recently given to the Development Bank of Wales by the Welsh Government towards funding new microbusinesses employing less than ten people. Using their own success as an exampl...

Earlier this week, the Welsh Government published its Economic Resilience and Reconstruction Mission which sets out how it will work to rebuild Wales’ post COVID-19 economy. Like every economic strategy document, there are elements of good and bad policymaking within the document. For example, some of the actions on developing a greener economy, supporting innovation, improving digital skills, better public procurement and moves to support our high streets are to be welcomed.  But there are also considerable omissions on key issues which are critical to development of any economy, never mind that of Wales which is the poorest in the UK. For example, there is a total lack of focus on supporting entrepreneurship and new businesses. This is despite overwhelming evidence that new firms not only create the majority of new jobs in any economy but especially during a recession where large firms continue to shed hundreds of thousands of jobs.  And it’s not as if the Welsh Government h...

One of the major concerns from the tech sector when the Covid-19 pandemic hit was that the availability of funding into those businesses that can grow quickly in knowledge-based sectors would be dramatically curtailed as individual and institutional investors withdrew from the market. This was the main reason why the Chancellor of the Exchequer introduced the £500m Future Fund to provide government loans of £125,000 to £5 million to equity-funded UK-based companies which would then be matched by investors. Whilst this intervention would have been largely targeted at formal venture capital companies, very few informal individual investors would have directly benefited given the lower levels of funding they provide.  However, these business angels are critical to any economy as they often are the ones who will put up the money for high risk investments into new exciting companies that the banks tend to ignore. More importantly, the better angels not only invest money but often, as fo...

When I conducted the Access to Finance review for the Welsh Government seven years ago, it was the affordability of the repayment of a loan, rather than the cost of borrowing, that was cited in interviews with banks, intermediaries and small businesses as being the main obstacles to accessing bank finance.  From discussions with the banks at the time, it was clear that more stringent rules regarding credit availability has reduced the terms of loans and the affordability to many businesses.  This was also the conclusion of a major review of the Royal Bank of Scotland’s lending to small firms which found that whilst the average contractual term for commercial banking loans was approximately nine years for accounts opened in 2008, this had been shortened to approximately five years in 2009 and had largely continued at that level since for most accounts. Given this, one of the recommendations that we made for the creation of a new Development Bank of Wales following the review wa...

When I undertook the Access to Finance for SMEs review for the Welsh Government seven years ago, the most invaluable source of data for the investigation was the SME Finance Monitor.  The information gathered by the largest study of its kind in the UK not only provided accurate and timely data on how SMEs were accessing funding from a range of different sources but was also a useful predictor of the state of the small firm community. Given this, the latest report from the monitor on how SMEs have been impacted by Covid 19 is an invaluable indicator of what has been happening to entrepreneurs across the UK during the recent pandemic with 4,511 interviews conducted between April and June 2020. Not surprisingly, it found that 87% of SMEs had reported being negatively affected by Covid 19 with the biggest impact being a reduction in sales of more than 50%.  In fact, six out of ten SMEs were expecting this lower turnover to continue over the next few months with the biggest impact ...

Despite the massive challenges caused by the Covid-19 pandemic, it seems that entrepreneurship remains alive and well within the Welsh economy. Take, for example, the Wales Start-Up Awards, which will be announcing its shortlist for 2020 next week.  The annual competition to find the best new firms in Wales had over 540 entries from every part of the nation - the highest in its five year history - with 40 per cent of these submitted by women-owned start-ups.  More importantly, there were some incredible businesses across all industries from traditional sectors such as business to business services, food and drink and construction, to emerging new areas such as cyber, fintech and mobile technologies.  Recognising the achievements of these new businesses is critical as research shows time and time again that it is newer and smaller businesses that create most of the employment as we come out of a recession.  In contrast (and as we have seen over the last few days), it ...

As we end the sixth week of lockdown for the UK economy, the government continues to adjust its support for businesses affected by the Covid-19 shutdown.  This flexibility amongst politicians is a breath of fresh air and the Chancellor Rishi Sunak must be congratulated for responding to the concerns of entrepreneurs and CEOs. The latest initiative involves changing the terms and conditions of the Coronavirus Business Intervention loans scheme (CBIL) which had attracted much criticism for being too slow in getting money out to struggling firms across the UK. For once, Whitehall was not to blame and instead, the banking industry seemed to have been unable to cope with the demand for this type of lending through their present systems.  There was also the suspicion that some lenders were, instead of piling in to help the small firm sector in the way that they had been supported by the taxpayer during the last recession, were reluctant to risk any of their own funds under a scheme ...

Three years ago, this column wrote a piece about the challenges that were facing the Swansea Bay City Deal when it largely abandoned the digital future envisioned by Sir Terry Matthews, one of Wales’ most successful entrepreneurs, to adopt a strategy focused very much on buildings such as the Wellness Centre in Llanelli.  Having had previous experience of this approach and written various critiques of the failed Technium initiative which was also a ‘if you build they will come” approach, I did not make the comments lightly. The subsequent issues that have arisen over the future of the Wellness Village, including an ongoing police investigation, were not surprising and, as I predicted, have had an effect on the viability of other worthwhile projects. Of course, speaking such truth to power has its dangers to any commentator in academia, public life or the media and I certainly received my share of personal abuse and professional criticism from supporters of this approach during that...

Back in 2013, I began a two-year assignment for the Welsh Government to examine the key challenges for Welsh SMEs in accessing finance, an exercise which eventually led to the creation of a new Development Bank of Wales. Since the task and finish group made its recommendations back in 2015, the environment for business has changed considerably and there has been a growing appreciation of the role that SMEs can play in growing the economy.  Understanding the environment in which SMEs operate, especially in terms of accessing finance, remains important to policymakers and that is why the recent publication of the Small Business Finance Markets report from the British Business Bank makes for some fascinating reading.  First of all, it is clear that there is an increasing flow of finance from providers to SMEs, not only in traditional debt lending but also in other forms of funding such as equity or asset finance.  But whilst there is more money available in the system, it wo...

I was delighted to accept an invitation to discuss the imminent creation of a new Scottish National Investment Bank with some its key advisers. The new bank is being created by the Scottish Government which has committed to give it £2 billion over 10 years to provide both debt and equity financing but with a focus on long-term patient capital (typically over 10-15 years). It will start investing in Scottish businesses and communities in 2020 and provide capital for business and infrastructure projects at all stages in the investment life cycle. What is interesting and ground-breaking about the strategy of this new body is that it will take a mission-based approach to investment i.e. Scottish Ministers will set the strategic direction of the Bank by identifying a set of medium-term outcomes for its investments such as transitioning to a low carbon economy; responding to demographic change; and promoting inclusive growth through place-making and regeneration.  This will obviously be ...

In order for technology-based start-ups to scale-up successfully, it is a normal prerequisite that there is a supply of venture capital available to fund expansion. Venture capital is finance provided to companies by specialist financial institutions in the form of equity investments. Whilst it has been estimated that only 1 in 10,000 start-ups actually get access to this type of funding, those companies that do receive this type of funding make considerable contribution to innovation, productivity and competitiveness. More importantly, venture capital is seen as the main source of funding for high potential risky start-ups in key sectors such as ICT and life sciences. Increasingly, the majority of venture capital funding comes from outside the UK and there is a greater dependency today on overseas capital to fund our entrepreneurs than ever before. Given the concerns over how Brexit could affect the UK economy, last week saw a fascinating report by Beauhurst – which tracks th...

For many new companies, access to capital is one of the critical factors that can mean the difference between success and failure as the business grows. Asa result, investment by individuals (commonly known as business angels) in exchange for equity in the business has become one of the key sources of funding in many innovative firms. In fact, it is estimated that business angels collectively invest an estimated £1.5 billion per annum and are the UK’s largest source of investment for start-ups and early-stage businesses seeking to grow. To encourage greater levels of investment by such individuals, the UK Government has created two incentives for investors. The first - the Enterprise Investment Scheme (EIS) - offers tax relief on new shares in small companies and individuals can invest up to £1,000,000 in any tax year and receive 30 per cent tax relief. The second – the Seed Enterprise Investment Scheme (SEIS) - was introduced in April 2012 to encourage investment in early s...