What is Wales’ vision for small businesses: The foundation of our economy?
What is Wales’ vision for small businesses: The foundation of our economy?
Small businesses are the Welsh economy.
Around 70% of privately employed workers in Wales work for SMEs, but in Wales we’re facing significant challenges in how we nurture and develop these vital businesses.
The most recent research by the British Business Bank showed that 21% of Welsh SMEs reported barriers to accessing finance, if this is true across all SMEs that’s around 50,000 companies that don’t feel confident that they can raise the capital needed to expand, create more jobs, and build sustainable businesses that bridge generations.
Entrepreneurs create new employment; their growth is vital to our economic growth and revitalisation of our towns and cities. Without their drive and hustle, we’re restricting our future prosperity.
The challenge of supporting SMEs
SMEs are a difficult group to engage with, they don’t always have a lot of shared challenges and priorities. Every sector has its own unique requirements, and trying to generalise them under one banner can lead to policies that don’t work for anyone.
The political agenda here is around productivity, but it’s very rare that I hear directors using language like this. Small business owners talk about survival, about cash flow, about finding the right people, not about abstract economic outputs.
Productivity is such an abstract concept, but business owners do talk about wanting more hours in the day and feeling like they’re already working flat out. The constant political chatter about productivity can feel like further evidence of politicians being out of touch with the everyday struggles and frustrations faced by business owners and operators.
When companies are growing, they need tailored support that recognises and deeply appreciates their unique challenges, not one-size-fits-all policies based on theory that misses the point and disrespects the needs of committed founders.
Focusing investment strategies
A few years ago, in the States when Amazon was being lured to different cities across the country, a counter campaign picked up momentum promoting the idea of supporting 10,000 independent workers rather than trying to attract 10,000 jobs through inward investment. This puts a key dilemma into sharp focus for Welsh economic policy.
Inward investment is an important strategy, but buying temporary jobs is not going to build long-term value. We need to focus on sustainable growth from companies grounded and rooted in Wales. SMEs need an inward investment strategy that leads to robust supply chains, and sustainable investment – which is obvious – but SMEs need policies that ensure that subsidised market entrants are giving back, especially if they have an unfair advantage in the talent wars through the funding and brand awareness.
One problem with the inward investment strategy in Wales is that a lot of SME directors feel frustrated by the lack of transparency and the sense that there are better incentives for outsiders coming in than for homegrown companies that wouldn’t dream of relocating.
Strategies need vision
We have a lot of mechanisms for investing in Welsh SMEs, but we need a clearer strategy on what the growth priorities are in Wales to help businesses understand better how to access appropriate support at the right time.
That support must understand much better why directors of SMEs in Wales are not able to take full advantage of incentives such as EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme), or why the Growth Guarantee Scheme hasn’t plugged the gap.
The relationship Welsh Government has with MIT through the Industrial Liaison Programme offers an interesting perspective. Their suggestion highlights the difference between SMEs and IDEs (Innovation-Driven Enterprises), and the need for different strategies. SMEs are your everyday, foundational economy businesses that exist on every high street or in every community.
There can be innovation, but innovation is not their bread and butter. IDEs are innovation driven – their approach can feel quite illogical to SME directors. Growth tends to come from IDEs, but it takes longer, and costs more to get to profitability. If this is our strategy, we either need to be transparent about it and make sure it is clearly understood and communicated, or we need to factor in how SMEs don’t go missing.
We need to help SMEs understand how to innovate better and how to win over funders and backers to last the course. Either way, a focus on innovation can’t belittle or downplay the important role that traditional SMEs have in our economy, nor neglect to support their needs when it comes to investment and appropriate advice to unlock the potential that they see if they just had access to increased resources.
Welsh founders need a vision for SMEs that balances nurturing homegrown businesses with attracting new investment, with practical support geared towards the needs of those directors, and that recognises and celebrates the diversity and resilience within our SME ecosystem.
Without this vision, we risk missing an opportunity to build a resilient economy for future generations of Wales.
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