ENTREPRENEURS have been bullied and forced to hand over control of their businesses after approaching the Development Bank of Wales for financial support, the Senedd heard.
Paul Davies, who chairs the economy committee, raised “extremely worrying” evidence from Dylan Jones-Evans, an economist and academic, about the Development Bank.
Mr Davies said the committee also received emails from people who had dealings with the bank and felt they had been bullied out or had their businesses essentially stolen.
Prof Jones-Evans told the committee: “Unfortunately, I have been approached by … businesses prior to this review who feel they have not been treated fairly with valuations being too low, where decisions have taken far too long, and where terms are unacceptable.
“Worst still, there have been instances where some have been bullied by the directors imposed on them, where they have been forced out by dubious means and where founders feel they have not been supported by the bank.”
Prof Jones-Evans warned that young, inexperienced founders found themselves in this position and should have received far greater support.
Mr Davies said: “If these reports are accurate, those actions may well have extinguished that entrepreneurial spirit, which would be an absolute tragedy and exactly the opposite of what the bank was established to do.”
The former Tory group leader added that much of the testimony was supplied anonymously, which limited the committee’s ability to scrutinise the evidence.
But he cautioned: “It only takes a brief look on a news website to find situations where allegations such as bullying have been made against other public institutions where, in some cases, they have been ignored and, as we know, sometimes these cases do not end well.”
Mr Davies stressed: “I just want to be clear: I have discussed these accusations with the bank via correspondence and in a private meeting and they absolutely refute them.”
Leading a debate on November 27, he said most of the evidence received by the committee, which made 13 recommendations, was supportive of the bank and its operations.
Mr Davies also raised concerns about the Development Bank being reclassified by the Office for National Statistics as central government in 2021.
He explained this leads to “double counting”, with the Welsh Government having to keep money in reserve to cover any uninvested funds given to the bank.
Plaid Cymru’s Luke Fletcher said the transition from Finance Wales to the Development Bank marked a step change in 2017, with investment doubling to £124m by 2022/23.
Mr Fletcher advocated merging the bank with Business Wales to create a one-stop shop.
Labour’s Hefin David pointed out the bank is not covered by Wales’ Future Generations Act, raising suggestions a social value clause could be inserted into grant and loan agreements.
Samuel Kurtz, the Conservatives’ shadow economy secretary, raised warnings from the Federation of Small Businesses of “massively fragmented” business support.
He expressed concerns about troubling evidence from Prof Jones-Evans that the Development Bank did nothing to stop imposed directors bullying out founders.
The economy committee scrutinised bank executives on November 20, questioning a 3.2% cost-of-living pay rise awarded to all staff including those earning six-figure salaries.
Dr David pointed out that annual remuneration for the highest-paid director increased by 20% from £217,000 to £260,000 between 2023 and 2024.
Giles Thorley, chief executive of the bank, which wrote off £27m in 2022/23, said 3.2% was lower than the Welsh Government’s rise, attributing the 20% to performance-related pay.
Rebecca Evans, Wales’ economy secretary, said the Development Bank has invested £778m in more than 3,900 businesses since 2017, supporting 41,700 jobs.
She said: “That’s a total impact of £1.66bn on the Welsh economy – real investment, real businesses, real growth, supporting businesses in every part of Wales.”
Turning to concerns received by the committee, Ms Evans said: “Finance can be complex and I am aware there are times when customers don’t understand the role of the bank or the obligations of the bank and this can, regrettably, lead to misunderstandings and complaints.”
She added: “I’ve had the opportunity to address concerns with officials. It is the case, though, that founder members of companies are sometimes removed by their boards.”
Ms Evans told the Senedd she has confidence in the leadership of the bank and its board, with an external review set to take place next year.