Business closures outpace start-ups in Wales as firms face rising costs

Nation.Cymru staff

More businesses closed than opened in Wales during the first quarter of the financial year, although over a third expected their performance to improve, according to a new economic report.

There were 2,535 business start-ups between April and June 2026, compared with 2,780 closures — a net loss of 245 businesses.

The latest Economic Intelligence Wales report highlights the pressures facing small and medium-sized firms, including weak confidence, rising costs and uncertainty over investment.

However, an Office for National Statistics survey in July found that 36.8% of Welsh businesses expected their performance to improve over the following 12 months, above the UK figure of 31.9%.

Professor Max Munday, professor of economics at Cardiff Business School and the report’s author, said confidence figures alone did not tell the whole story.

“Business confidence remains weak, and the figures for business births and deaths in Wales show the pressures facing the small and medium-sized business sector,” he said.

“However, the picture is more complex than confidence indicators alone suggest. More than a third of Welsh businesses expect their performance to improve over the next year, showing that there is still an appetite for growth despite the difficult trading environment.”

Across the UK, the Federation of Small Businesses’ confidence index fell to -57.4 in the second quarter of 2026. Just 21.7% of small and medium-sized businesses reported growth over the previous three months.

The report describes an uncertain economic outlook, with constraints on public spending and volatile energy prices affecting business costs and consumer confidence.

UK GDP grew by 0.4% in the three months to the end of July, but inflation and higher energy costs continued to complicate investment decisions.

Prof Munday said: “The challenge is ensuring that businesses with viable growth plans can access the finance and support they need, particularly when uncertainty makes investment decisions more difficult.”

The Development Bank of Wales completed 151 loan, equity and property investments worth £48.4 million during the April-to-June quarter. It said these created or safeguarded nearly 1,140 jobs.

Around 60% of the investments were intended to support business growth.

Businesses in south-east Wales accounted for almost 55% of the total investment value and around 52% of the jobs created or safeguarded.

The construction sector secured £13.7 million, while health and social work businesses received £6.8 million, supporting 193 jobs.

Cost pressures

Rhian Elston, chief investment officer at the Development Bank of Wales, said cost pressures and economic uncertainty continued to influence investment decisions.

“But many are also looking beyond the immediate difficulties and identifying opportunities to grow,” she said.

“The fact that around 60% of our investments during the quarter were intended to support business growth is encouraging. It shows that Welsh businesses continue to invest in their future, whether that means expanding capacity, entering new markets or scaling up their operations.”

Economic Intelligence Wales is a research partnership between the Development Bank of Wales, Cardiff Business School, Bangor Business School, the Enterprise Research Centre and the Office for National Statistics.