British Business Bank’s £ 130million Welsh fund competes well with Dev Bank

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For the business community in Wales, this week’s budget contained nothing that had not been discussed in the press in the previous weeks.

However, there has been a notable exception with the announcement that the British Business Ban has created a new £ 130million fund to support ambitious Welsh businesses.

For those of us who for years had asked the British Business Bank to make this kind of financing available to the business community in Wales, it came as a surprise as there had been indications at over the years that British Business Bank officials were not convinced by the argument for a substantial investment.

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In fact, I remember an event in London shortly after the publication of my report on Access to Finance for the Welsh Government in 2013 which demonstrated unequivocally that Wales had been largely ignored in terms of provision of venture capital by the British Business Bank.

Speaking to one of his senior officials, I tried to plead again, but was fired with the usual comment that there was simply not enough business flow in the Land of Wales to justify such an investment.

Further efforts were subsequently made to develop new venture capital funds and yet the attitude has remained the same and has shown complete ignorance of the business landscape in Wales.

Indeed, the fact that 50 of our fastest growing companies created an additional £ 336million in revenue between 2018 and 2020 and 2,000 new jobs in two years is a clear indication that there are companies out there. in Wales which could, with the right support and funding, create even more wealth and jobs in the economy.

I have no idea why this about-face happened last week, and it also seemed to take British Business Bank by surprise, but it should be warmly welcomed with open arms.

The fact that Wales receives 8% of the total funding made available in the UK’s nations and decentralized regions suggests that, contrary to what the Bank previously thought, the message has finally gotten that there is real potential within companies. in Wales.

Of course, now that the fund has been announced, there are other questions that will need to be answered. For example, is the fund expected to simply be ditched in the Wales Development Bank towers or, as many expect, will it be offered to fund managers who can have more experience in venture capital and investing in growing companies?

True, there are concerns that the development bank has a monopoly on start-up investments in new businesses in Wales and that having another fund here would at least ensure more competition in the market.

Some suggest that the development bank’s approach to venture capital is based on low valuations, high management costs and, so far, little impact on the Welsh economy, a new entrant in this field will certainly change the funding landscape dramatically.

Also, with the Cardiff Capital Region announcing that it will develop its own fund to support growing businesses in South East Wales, will this new money from the British Business Bank support or return this initiative. is it superfluous to the requirements?

Another interesting development from the British Business Bank is the announcement of an additional £ 150million over three years for the Regional Angels Program, which Wales has yet to take advantage of despite its aim to reduce regional imbalances in the region. ‘access to seeds and equity finance at an early stage for small businesses.

Again, the Development Bank appears to have a monopoly on supporting informal investors through its Angels Invest Wales program and it is hoped that this additional funding will encourage other business angel groups to establish themselves in the country. Wales.

There is also the funding guarantee of 33,000 start-up loans over the next three years which, other things being equal, will support over 1,600 new businesses in Wales, well beyond what the Development Bank provided to entrepreneurs who start a business.

Therefore, the Chancellor’s announcement of this new funding for Welsh businesses is to be warmly welcomed, especially if it creates a truly competitive market, and as I noted in 2013 in the Access to Finance report, “there remains a lack of consistency when it comes to the management and development of equity finance in Wales and there needs to be a more common approach to ensure a greater focus on attracting venture capital to businesses growth at all stages of development in Wales ”.

Eight years later, it seems like there is finally some movement to address this issue, and while the devil is in the details, this new funding is long overdue and is a significant addition to the country’s entrepreneurial ecosystem. of Wales.


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