Wales has the potential to be an economic overperformer in the UK, but several issues are holding back growth, according to research conducted by ICAEW as part of its Manifesto for the Welsh Parliament ahead of the Senedd elections.

The manifesto, published this week, outlines several barriers to growth, and three major actions the next Welsh government could take to address them.

ICAEW members in Wales identified several issues holding back growth.

It's too difficult to do business

“SME’s are increasingly reliant on finding skills through remote working, removing the barrier of location in Wales,” said one member. “I’m unsure if policy makers know of or even acknowledge this reality, but transport links are so often discussed in interview situations.”

Infrastructure weaknesses make doing business in Wales difficult, say members. Poor transport and connectivity between regions Wales and beyond is holding back growth. These limited road links increase costs for moving goods and accessing markets, and make it harder to attract investment and skilled workers. One member said that the Welsh government needs to “deliver reliable, high-quality transport and digital infrastructure that enables seamless UK and international client service, reinforcing Wales as a credible location for high-value professional firms.”

There is also a significant skills shortage within Wales. Of the working age adults in Wales, 7.9% have no qualifications and fewer than half hold Level 4+ (HE level) qualifications, according to Welsh government data. The Open University Business Barometer 2025 reports that 58% of Welsh organisations face skills shortages – the highest among UK nations.

“[We need] Well educated professionals with a desire to stay in Wales for a career,” said one Welsh member. “Communication skills seem in particularly short supply. The ability of young people to communicate face-to-face, over the phone or in writing seems very poor. Additionally, young people are leaving school with such poor Word and Excel skills.”

It's too expensive to do business

Business rates are increasing the costs of operating in Wales, giving large multinationals and online businesses over local stores and firms. It also results in businesses facing a difficult choice: invest in larger premises that could support future growth, but increase costs; or staying put, and limiting growth ambitions.

“While costs are guaranteed, there is never any certainty that investment will generate additional revenue streams,” said a Welsh member. “Business is extremely tough at the moment, with pressures from all directions.”

Technology adoption is also a major cost barrier, with software, training and expertise currently too expensive for small businesses. As digitalisation and automation become more common, this puts them at a competitive disadvantage.

It's too uncertain to do business

Wales was the only UK region to register an increase in new businesses in Q4 2025, with equity fundraising rising by 396%. However, investors do not always recognise the potential of the region.

“[We need] international promotion of Wales as a professional services hub…. Wales is sometimes overlooked as a base for high-value professional services compared to London or major English cities,” one member said.

There is also an economic imbalance between regions within Wales, including heavy reliance on sectors such as tourism and gaps in education and productivity. Skilled workers then move to more prosperous areas of the country, creating more uncertainty elsewhere.

With this in mind, ICAEW outlined three solutions in its manifesto.

1. Simplify doing business

The Welsh government should improve infrastructure by refocusing its infrastructure strategy, with a 10-year plan to improve transport and digital connectivity across the nation. The Burns Delivery Unit’s public transport upgrade programme, which will improve links between Cardiff and Newport, should be delivered at pace.

A national education and training strategy, with clear pathways into work for school leavers, is also needed. That includes an apprenticeship system that is responsive to employer skills demands and is aligned to the key growth sectors for the UK.

Mentoring schemes could also help people in education connect with potential employers.

2. Lower costs for growth

Business rates relief should reflect real cost pressures. Liabilities should reflect profitability and trading activity, while the current model penalises businesses in larger premises. Solutions such as hybrid assessment models could rectify this.

Targeted relief for businesses headquartered in Wales or committing to long-term investment in the region could encourage more investment. For example, incentives for modern office space, digital infrastructure, and decarbonisation upgrades.

The PACE Cymru and SMART Digital programmes should be expanded, with larger grant ceilings and more rural outreach. Procurement, funding access and SME investment readiness programmes should be streamlined and enhanced to level the playing field for small businesses. 

3. Deliver certainty

Wales needs a clear vision for its economy, outlined in an International Strategy that aligns with the UK’s Modern Industrial Strategy. It needs to showcase the nation’s economic strengths in advanced manufacturing, clean energy industries, digital technologies, and professional and business services.

The Senedd should work with local authorities on region‑specific investment propositions grounded in each area’s strengths, to address economic imbalances.

Robert Lloyd Griffiths, Director of ICAEW in Wales, said: “Wales has huge strengths with talented people, strong entrepreneurial energy and businesses that want to invest, innovate and export. But too many firms are still being held back by obstacles that make doing business difficult, expensive and uncertain.

“If we want to raise living standards and close the gap with the rest of the UK, productivity cannot be an afterthought. That’s why we’re calling on the next Welsh Government to appoint a Commissioner for Productivity – someone with the authority to keep delivery on track, champion reform across government, and make sure Wales turns ambition into measurable improvements for businesses and communities.”