Frank Holmes says the real dividing line is not between nationalism and globalism. It is between capability and complacency
Frank Holmes.
Wales is not a large economy pretending to be small. It is structurally small. The overwhelming majority of Welsh firms are micro enterprises, many of them lifestyle businesses, subcontractors or locally oriented service providers.
Medium-sized companies, the real engines of productivity, export intensity and durable wage growth, are comparatively scarce. That imbalance explains much of Wales’ GVA (gross valued added) gap and its persistent productivity under performance.
It also explains why every political cycle returns to the same question: how do we build scale?
Plaid Cymru’s Senedd Election manifesto places ownership at the centre of the answer. The diagnosis is the “ownership gap”, the claim that Wales loses too much value because successful firms are sold externally and profits flow out. The proposed remedy is a stronger state-backed institutional architecture, including a National Development Agency, a more assertive Development Bank of Wales and a procurement system designed to retain wealth locally. The intention is clear. The consequences are more complex.
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Growing micro-firms into small companies, and small firms into medium-sized enterprises, requires more than stable local demand. It requires management depth, access to capital, export ambition, product differentiation and competitive pressure.
Public procurement reform may provide revenue stability, and patient capital may bridge funding gaps, but neither automatically produces internationally competitive firms. If policy softens competitive tension too far, firms can survive without truly scaling. The danger is institutionalising smallness rather than overcoming it. Protection can preserve, but it does not necessarily propel.
The comparison with Germany’s Mittelstand is frequently invoked, and rightly so. Germany’s economy is also SME-dominated, yet its mid-sized industrial champions command global niches with remarkable precision. However, the Mittelstand is not simply about local ownership. It is about specialisation, export penetration and long-term governance discipline.
These companies are often family-controlled, but they are globally integrated. They do not fear scale or external markets. They dominate them. The lesson for Wales is not merely to retain ownership but to cultivate firms capable of owning markets. Without export depth and technical specialisation, ownership becomes symbolic rather than strategic.
On inward investment and mergers and acquisitions, the evidence from Wales itself complicates the narrative. Trade sales have historically been the dominant exit route for Welsh businesses, and a large majority of those companies have remained operating in Wales after acquisition.
Ownership change has not equated to economic disappearance. Strategic acquirers frequently bring systems, working capital, distribution channels and professional governance that domestic firms alone may struggle to build. If Wales signals scepticism toward external capital, even indirectly, the likely effect is not an abrupt withdrawal of investment but a repricing. Fewer bidders. Lower valuations. Greater caution. Capital does not debate ideology. It reallocates.
Succession planning illustrates this tension clearly. Most SME owners are not driven by political philosophy but by retirement security, legacy, and compensation for risk taking, job creation and delivering economic impact. They want clarity on valuation, tax treatment, timing and continuity. If policy narrows perceived exit routes, some will accelerate sales, restructure holdings or incorporate elsewhere to preserve flexibility.
Conversely, if a reformed development bank can credibly finance management buy-outs or structured internal successions on competitive terms, domestic retention becomes commercially viable rather than politically aspirational. Employee ownership models have a place, but where vendor financing constrains cash flow and investment capacity, resilience can weaken rather than strengthen. Ideology does not replace financial reality.
For corporate investors considering Wales as a relocation base for services or manufacturing, the evaluation criteria remain unchanged. Skills depth, grid capacity, digital infrastructure, transport connectivity, planning speed and policy stability determine decisions.
The Cardiff Capital Region narrative of cluster strength in semiconductors, energy systems, digital industries and creative production is compelling when matched by execution. Investors seek predictability and technical competence. They do not seek protection from competition. If Wales demonstrates institutional maturity and regulatory clarity, capital will engage. If it projects uncertainty around ownership or capital mobility, investors will hedge their exposure.
The proposal for a stronger National Development Agency sits at the centre of this debate. Properly governed, such an institution can provide patient equity, bridge succession finance gaps and crowd in private capital into strategic sectors. It can smooth cycles and anchor long-term industrial bets.
Poorly governed, it can crowd out commercial lenders, politicise allocation decisions and concentrate valuation risk on the public balance sheet. The difference lies in governance discipline, transparency and a clear commercial mandate. If the institution becomes a co-investor with global capital, Wales strengthens its credibility. If it becomes a gatekeeper of capital flows, Wales narrows its own opportunity set.
The broader impact of economic nationalism on GVA and productivity depends on how it is implemented. Retaining more profits locally can improve multiplier effects and community resilience. Aligning skills provision with industrial needs can raise labour productivity and we must double down on adopting AI too. Supporting domestic succession can preserve employment continuity. Yet if the framework discourages competitive exits, reduces the diversity of capital sources or prioritises ownership retention over operational excellence, productivity growth will slow. Sustainable economic growth requires both rootedness and openness.
External investors can and do bring other benefits, not least experienced management and board members, networks within their portfolio companies, international reach and discipline on planned delivery and governance. This extends to Stock Exchange listed companies, of which there are too few in Wales, with only one FTSE 100 company, Admiral Group, whose shareholders are international.
The real dividing line is not between nationalism and globalism. It is between capability and complacency. Ownership matters when it supports strategic continuity and reinvestment. It becomes irrelevant when firms lack competitive edge. Wales does not need to shield itself from global capital. It needs to negotiate from a position of strength. That strength will come from skills, infrastructure, cluster coherence and disciplined institutions.
The opportunity is genuine. So is the risk. The future of Wales’ economy will not be determined by who owns its companies. Competitiveness and reach beyond Wales is the outcome that ultimately matters.
Frank Holmes is a partner with Gambit Corporate Finance and chair of the Cardiff Capital Region’s Economic Growth Partnership.