The Welsh Economy Minister Edwina Hart has ordered a viability study into the setting up and operation of a development bank to support the country’s businesses.
A development bank for Wales was proposed in a review last year by the economist Dylan Jones-Evans. The minister has decided to explore its potential following continued criticism of the performance and policies of the Welsh government’s investment body Finance Wales which the report branded as “not fit for purpose”.
Any new bank would take over the responsibilities of Finance Wales — set up in 2001 to lend money to or buy shares in Welsh companies — and which last year’s review said was too focused on generating profits rather than helping businesses and developing the Welsh economy. It also highlighted alleged confusion over Finance Wales’s exact role and concerns about the cost of loans to small firms.
The strongest criticism against the finance agency concerns its use of European cash and its failure to generate jobs. The £150m fund draws money from the EU and the Welsh government and was initially charged with creating 15,000 jobs during its six year life. This was later reduced during the recession to 10,070.
With a little over 18 months left — the fund will be wound up in September next year — the latest figures show that just 1,991 jobs have been created, around 20 per cent of its target, with most of the fund invested.
Mrs Hart has now confirmed she has asked Professor Jones-Evans, an academic at the University of the West of England, to examine the concept of a Welsh commercial bank in more depth and “explore the potential mission, role and operations that such an organisation could undertake, the legal and state aid framework required to establish and operate, the necessary skills, experience and costs, and the relative risks and rewards”.
The possibility of a state-owned bank dedicated to financing and supporting Welsh enterprises received the immediate backing of the Federation of Small Businesses. Its Welsh spokesman, Iestyn Davies said the professor’s report had “shone a stark light” on Finance Wales and the inflated interest rates it has been charging our members.
“We are very much in favour of reform to Finance Wales to ensure that it provides affordable loans to small business and is properly accountable with a far higher degree of transparency and opportunity for scrutiny than exists at present,” he added. “The notion of a Development Bank of Wales is worthy of serious consideration.”
Rhun ap Iorwerth is Plaid Cymru’s economy spokesman. “Access to finance has consistently been cited as a barrier to growth for many small and medium size enterprises and much more needs to be done to tackle this problem,” he said. “A Welsh public bank, owned by the public but at arm’s length from government, to lend money to small businesses at competitive rates and to offer finance services, is the boost that Welsh businesses need.”