Welsh SMEs See Finance Boost Amid Uncertainty in 2026

Key Points

• Improved access to finances is benefiting SMEs in Wales; however, economic uncertainty is the major factor that is restricting their growth in accordance with the Economic Intelligence Wales (EIW) annual report 2025/26.
• Lending to small enterprises has increased by 51 per cent during Q1 of 2026 compared to the same quarter in 2025. External financing is used by 50 per cent of UK SMEs.
• Confidence Index of Federation of Small Businesses stood negative at -52.5; furthermore, Wales has registered more business failures than new businesses in Q1 of 2026.
• About 35 per cent of businesses in Wales anticipate improved performances next year, which is higher than the UK’s average, whereas UK’s GDP has grown by 0.7 per cent up until April 2026.
• Report was released on 9 September 2026 by the Welsh Economy Research Unit at Cardiff Business School, along with the involvement of several organizations such as Development Bank of Wales.
• Cabinet Minister Adam Price and one of the authors of the report, Max Munday, highlighted the significance of access to finance in relation to productivity and investments.

Wales (Wales Times) September 09, 2026 – The Economic Intelligence Wales (EIW) annual report 2025/26, published on Wednesday 9 September 2026, indicates that improving access to finance is providing a welcome boost for Welsh small and medium-sized enterprises (SMEs), although economic uncertainty continues to be the most significant barrier to business growth. Produced by Dr Mark Lang, Professor Max Munday, Professor Annette Roberts and Neil Roche of the Welsh Economy Research Unit at uk/local/cardiff/">Cardiff Business School, the report forms part of the wider Economic Intelligence Wales initiative, a collaboration between Cardiff Business School, Bangor Business School, the Enterprise Research Centre, the Office for National Statistics and the Development Bank of Wales.

The publication arrives at a pivotal moment for the Welsh economy following the election of a new Plaid Cymru-led Welsh Government, which has positioned productivity growth at the centre of its economic strategy, with an ambition to halve the productivity gap between Wales and the rest of the UK within a decade. SMEs are viewed as central to driving innovation, investment and long-term economic growth under this strategy.

What are the main findings on finance conditions for Welsh SMEs?

The report highlights encouraging signs in the finance market, with lenders reporting increased credit availability across small, medium and large businesses in the first quarter of 2026. Gross lending to small firms increased by 51 per cent in Q1 2026 compared with the same period a year earlier, while 50 per cent of UK SMEs reported using some form of external finance. Lenders also reported increasing demand for finance from smaller firms and improved credit availability across the market.

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

“As an independent research collaboration, Economic Intelligence Wales provides valuable evidence and insight that helps us, policymakers and the wider business community better understand the conditions facing Welsh SMEs.”

He added:

“The findings in this report reflect what we are hearing from businesses across Wales. Costs, recruitment and uncertainty continue to create real challenges, but many SMEs are still looking ahead and investing for the future.”

What challenges do Welsh businesses continue to face?

Despite improved finance conditions, businesses continue to face significant economic headwinds. The Federation of Small Businesses’ confidence index remained firmly negative at -52.5, with economic conditions cited as the principal concern for SMEs. The report also notes that Wales saw more business closures than new business start-ups during the first quarter of 2026, while the value of Welsh exports fell by 0.5 per cent to £19.1 billion in the year to March 2026.

While lenders reported increased credit availability, the wider economic backdrop remains challenging, with global growth forecasts downgraded, inflation remaining above target and businesses continuing to face uncertainty around costs, recruitment and future demand.

What do government and report authors say about the outlook?

Cabinet Minister for Enterprise, Connectivity and Energy, Adam Price, said: “Economic uncertainty continues to weigh on many businesses, but this report provides grounds for cautious optimism.” He continued: “Signs of improving finance conditions and renewed business ambition are welcome, particularly at a time when investment will be critical to Wales’ future economic success.”

Professor Max Munday of the Welsh Economy Research Unit at Cardiff Business School and an author of the report said:

“This year’s annual report shows a mixed picture for Welsh SMEs.”

He added:

“There are encouraging signs that finance conditions are improving, with increased credit availability and stronger lending to small firms.” However, he cautioned:

“Confidence remains fragile and the wider economic climate continues to weigh heavily on investment decisions.”

Are there reasons for optimism despite challenges?

Despite these challenges, there are reasons for cautious optimism. Almost 35 per cent of Welsh businesses expect their performance to improve during the coming year, above the UK average, while UK GDP increased by 0.7 per cent in the three months to April 2026.

Professor Munday emphasised:

“With productivity now central to Wales’ economic mission, ensuring SMEs can access the finance they need to invest, innovate and grow will be critical.”

Adam Price stated:

“Raising productivity means helping businesses invest in new products, skills and technology.”

He concluded:

“Ensuring that ambitious firms can access the capital they need to grow and innovate will be vital if we are to build a more prosperous and competitive Welsh economy.”

Background of the Economic Intelligence Wales Annual Report Development

The Economic Intelligence Wales initiative represents a sustained collaboration between academic institutions, government bodies and financial organisations to provide robust, independent data on the Welsh economy. The annual report is produced by the Welsh Economy Research Unit at Cardiff Business School, working with Bangor Business School, the Enterprise Research Centre, the Office for National Statistics and the Development Bank of Wales. This partnership ensures that the analysis draws on diverse expertise and authoritative data sources, enabling comprehensive assessment of economic conditions, business confidence and access to finance across Wales.

The 2025/26 report comes following significant political change in Wales, with a new Plaid Cymru-led Welsh Government placing productivity growth at the centre of its economic strategy. The government has set an ambition to halve the productivity gap between Wales and the rest of the UK within a decade, recognising SMEs as central to achieving this objective through innovation, investment and sustained growth. The report’s timing allows policymakers, business support organisations and financial institutions to align their strategies with emerging evidence on SME conditions and needs.

Prediction: How This Development Can Affect Welsh SMEs and the Wider Economy

The improving finance conditions identified in the Economic Intelligence Wales annual report are likely to have significant implications for Welsh SMEs and the broader economy over the coming year. With gross lending to small firms up 51 per cent in Q1 2026 and increased credit availability reported across the market, Welsh SMEs that have been constrained by access to capital may find greater opportunity to invest in productivity-enhancing measures, including new technology, skills development and product innovation.

However, the persistent negative confidence index at -52.5 and the continued predominance of economic uncertainty as the principal concern suggest that finance availability alone may not be sufficient to drive widespread growth. Welsh SMEs are likely to remain cautious in their investment decisions, particularly given the backdrop of downgraded global growth forecasts, inflation above target and ongoing uncertainty around costs, recruitment and future demand.

The fact that almost 35 per cent of Welsh businesses expect performance to improve, above the UK average, indicates that a significant proportion of firms are positioning themselves for growth despite challenging conditions. For these businesses, improved access to finance could enable them to act on their optimism, potentially driving employment, output and innovation in key sectors.

For policymakers, the report’s findings suggest that continued focus on productivity, alongside targeted support for SME finance access, will be essential to translating improved finance conditions into sustained economic growth. The Welsh Government’s ambition to halve the productivity gap within a decade will depend on ensuring that viable businesses can access the right finance at the right time, as emphasised by Giles Thorley of the Development Bank of Wales.

For Welsh SMEs, the development points to a period of cautious opportunity, where those able to navigate uncertainty and secure appropriate finance may be well-positioned to invest and grow, while others may continue to prioritise resilience and survival in a challenging economic climate.