Improving access to finance is providing a welcome boost for Welsh SMEs, but economic uncertainty remains the biggest barrier to business growth, according to the Economic Intelligence Wales (EIW) annual report 2025/26.
Produced by Dr Mark Lang, Professor Max Munday, Professor Annette Roberts and Neil Roche of the Welsh Economy Research Unit at Cardiff Business School, the report provides an annual assessment of economic conditions, business confidence and access to finance in Wales. The publication 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.
Published today (Wednesday 9 September 2026), the report comes at a significant moment for the Welsh economy following the election of a new Plaid Cymru-led Welsh Government, which has placed 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 seen as central to driving innovation, investment and long-term economic growth.
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. 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.
“Raising productivity means helping businesses invest in new products, skills and technology. 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.”
While lenders reported increased credit availability across small, medium and large businesses in the first quarter of 2026, the wider economic backdrop remains challenging. Global growth forecasts have been downgraded, inflation remains above target and businesses continue to face uncertainty around costs, recruitment and future demand.
The report highlights encouraging signs in the finance market. Gross lending to small firms increased by 51 per cent in the first quarter of 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.
However, 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.
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 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. There are encouraging signs that finance conditions are improving, with increased credit availability and stronger lending to small firms.
“However, confidence remains fragile and the wider economic climate continues to weigh heavily on investment decisions. With productivity now central to Wales’ economic mission, ensuring SMEs can access the finance they need to invest, innovate and grow will be critical.”
Giles Thorley, Chief Executive of the Development Bank of Wales, added: “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. Robust, independent data is essential if we are to make informed decisions and ensure that support is targeted where it can have the greatest impact.
“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.
“Our role is to make sure that viable businesses can access the right finance at the right time, whether that is to manage short-term pressures, invest in productivity or support long-term growth.”
