Today, I have launched the Welsh Conservative vision for a new scheme which will help our striving small business owners to access finance - imperative for the growth, maintenance and success of any business - and how they can do it in a way which is straightforward and local.
Wales has an aspiring business community where 99.2% of our private sector workforce is made up of micro, small and medium sized enterprises (SMEs). This startling statistic shows us that there is already a wealth of talent and ideas in our small but aspirational nation. The Federation of Small Businesses (FSB) has highlighted the fact that if each of our businesses employed one extra person then Welsh unemployment would be solved.
But there is a problem. SMEs are having trouble convincing banks that they are viable cases for lending. The reason for this is often because the amounts they require are too small to make their loans profitable for high street banks. In the case of loans as low as £1,000, which to a bank is very little but to a business who may be able to buy equipment, stock and advertising means a great deal, the costs of administering that loan outweigh the benefits to the bank.
In Wales we have two sets of institutions which are meant to help micro, small and medium sized businesses with financing and guidance. Finance Wales and Business Wales exist for this purpose. Finance Wales has recently become a wholly-owned subsidiary of the Welsh government, and they have their head offices in Cardiff. The institution has made investments in around 2,000 businesses since its inception in 2001 however, worryingly an FSB study found that 64% of SMEs in Wales had never even heard of it. It is apparent that Finance Wales is often seen as a distant and complex organisation which has little connection to businesses on the high street. Around the world, different systems have developed where localised access to finance has provided a solution for SMEs. In Germany, local banks called 'sparkassen' have provided access to finance for SMEs, with the repayments to the banks then kept in the local community to fund further investments. In the US, Business Development Centers tackle the lack of expertise that some entrepreneurs face in marketing, forming a business plan and complying with complex business regulations. The Business Development Bank of Canada also caters for SMEs by providing consulting services, risk assessments and personal repayment plans, as well as services in both official languages. A trial partnership between the local council and Santander resulted in the Bank of Essex and ran a successful financing operation for two
years before unfortunately the political will dried up.
Our policy idea, Invest Wales, takes the most successful parts of these models and applies them to the Welsh economic climate. An independent board would sit alongside the Welsh government, and oversee six regional offices - offices which recognise the distinct economic challenges of the different parts of Wales. Our vision would be that in partnership with a high street bank, an Invest Wales 'bank manager' would be employed in each branch, to meet with small businesses and provide expert advice and guidance. They will be tasked with making local connections and promoting relationships within the business community in their area.
Localising access to finance is key to improving the Welsh economy. Certain industries are pervasive in different regions throughout Wales, and an Invest Wales bank manager on the Welsh high street would be able to identify gaps in the market, and assess the viability for that region's economy. The debt repayments or equity acquired would go into reinvesting in more small businesses in that region.
I am ambitious for Wales and I believe in the Welsh people. I want them to succeed, and I believe that the Welsh government could be doing more to ensure businesses aren't turned down outright when they try to access finance. When a high street bank can't provide support, the various levers that the state has at its disposal must be used to its best advantage.
The minister for business and enterprise has announced a review of the availability of funding for SMEs, which will report in the Autumn. I hope that they will take on board our proposals and act sooner rather than later to help Welsh businesses. They cannot afford to wait.