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...

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 ...

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 ...

When I undertook the Access to Finance review for the Welsh Government that culminated in the recommendation for a Development Bank for Wales, it was important to ensure that detailed research was undertaken to demonstrate the case for closing the finance gap faced by small to medium-sized enterprises (SMEs). Given that prior studies had showed that, in general, SMEs had encountered increased difficulties to access bank credit following the global financial crisis, we wanted to understand if this was the case in Wales and whether the geographical location of banks across the UK had any impact on SME access to bank finance. To do this, we analysed data on bank lending gathered by the SME Finance Monitor which, since 2011, has questioned 5,000 different SMEs quarterly in the UK about their borrowing events. More than 65,000 interviews have now been conducted as part of this survey, building into a considerable dataset on the past and future finance needs of SMEs in the UK. We hav...

This week, the second Wales Start-Ups awards were launched to not only celebrate the achievements of new businesses across our nation but to help identify those entrepreneurs that could make it big in the future. Indeed, all of last year’s finalists showed that not only are start-ups in Wales growing but they could really make a difference to the economy over the next few years. But many of those entrepreneurs at the 2016 awards will surely be redoubling their efforts this week following the announcement that Improbable, a business started by three university graduates only five years ago, has raised £390 million predominantly from a Japanese investor. Currently employing over 200 highly skilled staff, the company develops technology that enables the building of virtual worlds in the cloud, with potential applications ranging from massive multiplayer games to simulations of vital infrastructure such as transport systems. As a result, Improbable has become one of the few UK s...

Research has shown that by far the most significant source of equity capital for high growth potential businesses are individual informal investors (or business angels). These are individuals who provide support for the formal venture capital sector by seeking out new entrepreneurs and nurturing them up to be investment-ready, thereby raising the number of start-ups and increasing the deal flow for venture capital companies. In this respect, business angels are widely recognized to play a key role in the first round of equity capital of ‘the funding escalator’ prior to entry by venture capital for a small proportion of companies. Indeed, contrary to popular myths about entrepreneurial finance, the vast majority of successful high growth potential businesses taking equity finance do not receive venture capital funding even in the most developed capital markets such as the USA. During the last few years, the UK has benefited from a number of policies that have provided incentiv...

Since a new chairman (Gareth Bullock) and chief executive (Giles Thornley) were appointed to head up Finance Wales, there may be positive signs that its previous intransigence towards change is slowly being eroded. However, much remains to be done given that transforming the corporate culture of any organisation – especially one that had its head stuck in the sand for far too long - will not happen overnight. This is best demonstrated by the launch earlier this week of a new £136 million Wales Business Fund to support SMEs. The good news that many have been waiting for is that Finance Wales has finally appreciated that there is a need for affordable finance to firms by reducing its lowest rate of interest for loans from eight per cent to four per cent. This is something that the access to finance review proposed time and time again only to be told by a range of senior executives within Finance Wales and many in the corporate finance world that it simply could not be done. ...

Since a new chairman and chief executive were appointed to head up Finance Wales, there are positive signs that its previous intransigence towards change is slowly being eroded. However, much remains to be done given that transforming the corporate culture of any organisation – especially one that had its head stuck in the sand for far too long - will not happen overnight. This is best demonstrated by the launch earlier this week of a new £136m Wales Business Fund to support SMEs. The good news that many have been waiting for is that Finance Wales has finally appreciated that there is a need for affordable finance to firms by reducing its lowest rate of interest for loans from 8% to 4%. This is something that the access to finance review proposed time and time again only to be told by a range of senior executives within Finance Wales and many in the corporate finance world that it simply could not be done. Now that it has taken this step and halved its cost of lending, I a...

I have been very fortunate in my career to work with some brilliant young academics who have gone to make a real impact in their field. One of these is Dr Niall Mackenzie , who joined the University of Wales from Cambridge University five years ago before leaving to go back home to a lectureship at the Hunter Centre for Entrepreneurship at Strathclyde University. Niall has been undertaking a number of research studies since he arrived back in Glasgow and possibly one of the most influential has been his analysis of the performance of Archangels, Scotland’s oldest business angel group . Business angels – those private individuals investing in unquoted companies - have received growing attention and recognition for their activities in the UK in the last 25 years. Their investments typically involve receiving equity that is reduced with further rounds of financing for investee companies. As would be expected with such transactions, angel investment involves a risk of failure but...

Whilst much of the recent debate on access to finance to small to medium sized enterprises (SMEs) has focused on traditional bank loans or equity investments, there are other forms of funding which should also be considered as an alternative source of money for firms in Wales. One solution that is being increasingly used by companies to deal with late payment whilst improving cashflow is that of invoice finance. This is where a finance provider pays an agreed proportion (usually 80-85 per cent) of approved invoices to the company on receipt of a copy of the invoice. The balance (less a small charge) is paid upon client payment. With the economy growing, there has been a surge in demand for working capital in the SME sector that has created opportunities for more invoice financing. Despite this, its current use is relatively low compared to more traditional sources of lending and only 43,000 SMEs out of a total of nearly 5 million in the UK are currently utilising invoice fi...

On Wednesday this week, following a Welsh Conservative debate on access to finance for small to medium sized enterprises (SMEs), a majority of AMs in the National Assembly for Wales agreed “that Finance Wales does not fully meet the needs of small businesses across Wales and that access to finance is still a problem for many SMEs”. They also called on “the Welsh Government to establish a Welsh Development Bank as recognised in the report published by Professor Dylan Jones-Evans”. This was another step on the road to ensure that SMEs, the engine room of the Welsh economy, are given the financial support they need to grow to create further wealth, jobs and prosperity for the nation. Whilst there is some way to go, it is not as if the Welsh Government has been sitting idly by since I started the first ever review into access to finance for SMEs for the Welsh Government in 2013. At the time, a major concern expressed by a number of stakeholders interviewed was the fact that there...

16:50 Y Dirprwy Lywydd / The Deputy Presiding Officer I now call for a vote on the motion as amended. Cynnig NDM5765 fel y’i diwygiwyd: Cynnig bod Cynulliad Cenedlaethol Cymru: 1. Yn nodi nad yw Cyllid Cymru yn diwallu yn llawn anghenion busnesau bach ledled Cymru a bod mynediad at gyllid yn parhau i fod yn broblem i lawer o fusnesau bach a chanolig;  2. Yn galw ar Lywodraeth Cymru i sefydlu Banc Datblygu i Gymru, fel y cydnabyddir yn yr adroddiad a gyhoeddwyd gan yr Athro Dylan Jones-Evans; a  3. Yn galw ar Lywodraeth Cymru i ystyried rhinweddau'r cynigion a amlinellir yn 'Gweledigaeth ar gyfer Buddsoddi yng Nghymru: Buddsoddi Cymru' a, lle y bo'n briodol, ystyried eu hymgorffori yn y gefnogaeth y mae Llywodraeth Cymru yn ei rhoi i fusnesau bach a chanolig yng Nghymru. Motion NDM5765 as amended: To propose that the National Assembly for Wales: 1. Notes that Finance Wales does not fully meet the needs of small businesses across Wales and that access t...

The Development Bank for Wales feasibility study has been published today and a full copy of the report is available here . It raises key points about the methods to close the funding gap and help deliver finance to Welsh SMEs including charitable, community and social enterprises. It also raises questions about some of the principles which underpin the provision of finance and the role of government funding for SMEs in economic development. Background A Task and Finish Group was appointed by the Minister for Economy, Science and Transport in June 2014 to produce a report on the possible form, function and feasibility of a Development Bank for Wales (DBW). It identified that a number of market gaps need to be addressed in the provision of finance to Welsh SMEs and that there is a geographic bias regarding the availability of bank credit, informal investment and venture capital to businesses in Wales.  Unfortunately, the public sector response within Wales has been under...

Since the 2008 financial crisis that led to the worse economic downturn since the 1920s, the high street banks have introduced more stringent rules regarding credit availability that have reduced the terms of loans and the affordability to many businesses. For example, whilst the average length of a commercial banking loan was approximately nine years for accounts opened in 2008, this was shortened to approximately five years in 2009, and has continued at that level since thus making lending less affordable to many businesses. Indeed, the latest Banking Taskforce Appeals Process Review for the UK has shown that for bank lending above £25,000, nearly half of the businesses cited affordability as the key reason for banks declining their request for a loan. Whilst it seems that little is being done to address the issue of affordability of finance in the UK which is restricting funding to many SMEs, the Irish Government has recently decided to deal with the lack of credit being made ...

When the first Access to Finance review was published in June 2013, there were very few loans being provided to those start-ups that, as various research studies have shown, create the vast majority of net jobs in the economy. As a result, I recommended that the Welsh Government should develop an appropriate mechanism for this type of support based on the Start-Up Loans programme operating, at the time, in England only. Fortunately, the Economy Minister saw the merit in this immediately and pushed forward with this recommendation. As a result, Wales launched its own version of the Start-Up Loans programme four months later. Funded through the UK Government’s Business Innovation and Skills Department, it is aimed at those entrepreneurs whose business is under 12 months old and offers low cost, unsecured loans of between £1,000 and £25,000 at a fixed interest rate of 6 per cent. The loans are to be paid back within five years and capital repayment holidays are available for those...

The Welsh Government may wish to consider several options as to how to take forward the findings of the access to finance review. For example, whilst there have been calls for a new state-owned bank, it could be argued that the foundations for such an organisation already exist in the form of Finance Wales. However, unlike other state-owned financial institutions that have been examined as part of this review, the main focus of Finance Wales has, for the last five years, been on establishing its reputation as a leading fund manager rather than on directly promoting economic development in Wales. In this respect, the Welsh Government could give Finance Wales a more direct remit so that economic development becomes its main priority, especially as questions clearly remain about its commitment to directly supporting SMEs in Wales, despite the presence of new board members. However, it is the conclusion of this review that, in its current form, Finance Wales is no longer fit for pur...