A new report commissioned by Economic Intelligence Wales says an informality towards investment planning should be focus for policy intervention
(Image: Matthew Horwood)
Nearly half of Welsh firms don’t undertake business cases for their most strategic investments which could lessen productivity improvement outcomes, shows new research from the Enterprise Research Centre.
Commissioned by Economic Intelligence Wales, the Productive Investment Decisions in Welsh Firms report, does show that Welsh businesses are investing more consistently – and more heavily – in people, skills, branding and digital capabilities than firms elsewhere in the UK.
Some 67% of Welsh firms planned their most strategically significant investments in under a year, while 88% completed their planning within three years, As with the rest of the UK, a large proportion did not use formal methods for investment planning, with the report showing as many as 47% didn’t have a business investment plan (for 2024) and 49% did not develop a business case for their most strategic investment – while the majority of firms in the rest of the UK do.
Moreover, just over a third (36%) did not evaluate the proposed investment, and 25% did not monitor its performance after completion. The lack of formalised strategies did not stop Welsh firms from making significant investments, but the with report adding this “could potentially reduce the productivity benefits of those investment.”
The report says that the informality of investment planning should be focus for policy intervention with a structure of support to help firms evaluate their investment priorities to “better deliver productivity gains and monitor investments.
Wales is similar to the rest of the UK in terms of the average number of people involved in business investment decisions as well as the proportion of investment decision-makers who are women (41% from ethnic minority groups (7%).
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From 2019 to 2024, Welsh firms invested, on average, 16% of their turnover in tangible assets and 8% in intangible assets. Internal company funds were by far the most common source of investment funding 91% for intangible investments). Bank loans or overdrafts were more frequently used for tangible rather than intangible investments (24% versus 13%). ]These financing patterns are similar to those in the rest of the UK.
The findings show that 87% of Welsh firms invested in staff training or education between 2019 and 2024, compared to 72% across the UK. This makes it the single largest investment category in Wales, rising even higher (93%) for strategically significant investments. Wales also outperforms the UK in investment in branding (51%), business structure or organisation (41%), and software or databases (63%), positioning Welsh firms at the forefront of the shift toward high-value, productivity-enhancing assets.
The report also shows that Welsh firms are investing in intangible assets more regularly over time. Firms invested in intangibles in three out of the last six years, compared with two years for tangible investment, reflecting a sustained focus on developing capability rather than one-off purchases.
Alongside this, Welsh businesses expect investment returns to be quick and predictable, something that is attractive to investors. The report revealed that 69% anticipate achieving returns within five years, while 94% are ‘somewhat’ or ‘very certain’ those returns will materialise.
Economic Intelligence Wales is a research collaboration between the Development Bank of Wales, Cardiff Business School, Bangor Business School, the Enterprise Research Centre, and the Office for National Statistics (ONS).
Cabinet Secretary for Economy, Energy and Planning, Rebecca Evans, said: “By investing in skills and training at levels above the UK average, Welsh businesses are building a workforce that is adaptable, innovative and ready for the future.
“This commitment to upskilling and emerging technologies is the foundation of a stronger, more productive economy, and it’s encouraging to see Welsh firms taking such a forward-thinking approach.”
Professor Stephen Roper, report author and director of the Enterprise Research Centre, said:“Wales stands out across the UK for its strong emphasis on investment in skills, digital capability, branding and organisational development. This is significant because these intangible assets are increasingly linked to productivity growth, and the fact that Welsh firms are investing more heavily in them than the UK average is an extremely positive sign for the future competitiveness of the Welsh economy.
“This confidence, coupled with the appetite for investment in skills and digital capability, suggests that Welsh firms are positioning themselves for future growth despite economic pressures.”
Rhian Elston, investment director at the Development Bank of Wales, said: “This report shows that Welsh businesses are strongly committed to developing their people and strengthening their capabilities, which is ultimately what will improve productivity and strengthen Wales’ competitive position.
“Intangible investment is one of the most important drivers of long-term productivity, yet it can be one of the hardest areas for firms to finance. That’s where our funding solutions can really help by lowering barriers to investment. We’re here to provide the capital that Welsh businesses need to take advantage of new opportunities and capitalise on emerging sectors including the recently announced AI growth zones as this is what will drive innovation and long-term growth.”
Professor Melanie Jones, Professor of Economics at Cardiff Business School and academic lead for the Wales Productivity Forum, said: “This research provides important new evidence on Welsh firm’s investment in training, organisational capability and digital improvement. This type of investment is likely to support long-term productivity improvement which is essential to improving future living standards in Wales.”
The report is based on a survey of Welsh firms with an average headcount of 45 and annual revenues of just £4m.
