The Federation of Small Businesses (FSB) Wales has welcomed the “stability” in the Welsh Government’s Draft Budget for 2026/27.
Further details of the Welsh Government's £27 billion Draft Budget have been set out, showing increases in funding for all key departments.
Finance Secretary Mark Drakeford said the departmental spending plans show the government's “commitment to protecting vital public services, while maintaining stability ahead of the Senedd election”.
Stage 2 of the Draft Budget 2026 – 27 sets out more than £800 million of additional funding compared to last year's budget, with protected funding for health, education and other essential services.
The Draft Budget also leaves £380 million unallocated for cross-party negotiations. However, FSB Wales warns that the budget overlooks the severe cost pressures on Wales’s 200,000+ small businesses.
A major concern is the lack of detail on non-domestic rates (NDR), FSB Wales said. The draft budget says NDR policy will be decided after the UK Autumn Budget on 26 November and assumes revenues will stay the same “in real terms”.
FSB Wales said this leaves important questions unanswered, such as how the multiplier will be set and whether relief will be shared fairly across businesses of different sizes.
FSB Wales said it noted that the draft budget keeps current levels of support in several areas that matter to small businesses. Business Wales gets £22 million to carry on its support for SMEs and entrepreneurs, while £9.7 million supports the Business Finance Funds for micro-businesses, SMEs, and social enterprises. Investment in the planning system stays at £5.1 million after last year’s rise, with the focus now on a 50% increase in application fees to fund local services. An extra £21.5 million through Medr will boost higher and further education, including skills and apprenticeships that small employers rely on, said FSB Wales.
Creative Wales will get £8.4 million in funding, including a new £1.4 million to cover non-domestic rates bills for studios. This brings Wales in line with support elsewhere in the UK and is good news for the creative sector, FSB Wales said.
The budget also gives £0.29 million in day-to-day funding and £2.77 million in capital to the Welsh Revenue Authority. Part of this is to set up a national register for visitor accommodation ahead of possible local visitor levies from April 2027, with registration starting in October 2026.
Speaking in response to the draft budget, Joshua Miles, Head of FSB Wales, said:
“This draft budget provides a stable platform and the £380 million in unallocated funding offers genuine potential for ambition in the final budget to helps SMEs across Wales. Welsh Government has indicated that the current proposals on business rates for retail, hospitality and leisure relief will be removed, which would be a 40% tax increase for many businesses. At a time when business costs are rising, it's crucial that cross-party negotiations lead to this being protected, either as a relief or as part of a new expanded retail, hospitality and leisure multiplier. We urge Ministers and Members of the Senedd to use the headroom this unallocated funding creates for targeted initiatives to help small businesses.
“FSB Wales calls for cross-party collaboration to deliver a final budget in January that keeps Welsh small businesses trading, hiring, growing and thriving for the benefits of all communities across Wales. Small businesses are the backbone of the Welsh economy.”
Russell Greenslade, Director, CBI Wales, said:
“Businesses that are continuing to bear the burden of high costs and other inflationary pressures were desperate for a draft Budget aimed at kick-starting investment in Wales’ lacklustre economy. Despite limited fiscal headroom, firms and investors will be pleased to see that the Welsh Government remains committed to breaking down critical barriers to growth.
“Raising long-term infrastructure spend from £2.8bn to £3.5bn is particularly welcome given the tight fiscal settlement and can act as a key catalyst of growth. Publication of the Infrastructure Finance Plan will also bring much needed certainty to businesses and can be instrumental in helping attract world-class firms and highly skilled people to Wales – particularly as the country forges ahead in key areas like clean energy, advanced manufacturing, semi-conductors, life sciences and digital innovation. A multi-year pipeline of projects will crowd-in private investment and lock-in benefits for local businesses.
“But to maximise these opportunities, business needs a local planning system that is fit-for-purpose and calibrated towards boosting growth. New funding for planning departments will support the faster delivery of applications, ensuring the Welsh Government both reaches housing targets and improves vital infrastructure such as road and rail. Business also needs to see the government urgently press ahead with plans for five new railway stations between Cardiff and the Severn Tunnel to alleviate congestion on the M4 around Newport.
“On skills, businesses remain concerned that a lack of additional funding for training providers and education institutions will hamstring efforts to future-proof Wales’ labour market with a skilled, productive and healthy workforce.
“Firms will question why Budget announcements on decarbonisation appear to prioritise support for small-scale, low-carbon energy initiatives, with comparatively less emphasis on helping major emitters – our anchor companies. However, the Welsh Government’s climate and energy spending encompasses a wide range of schemes, and further analysis is needed to fully understand their scope and impact.
“Government and business must work closely together to unlock further investment and build a strong, modern and sustainable Welsh economy that delivers meaningful growth and can compete with the world’s best.”
Finance Secretary Mark Drakeford said:
“These spending plans show how we're protecting the services people rely on most. Every key department will see increased funding, providing the stability our public services need.
“We remain open to working with other parties in the Senedd to build an even more ambitious budget. My door remains open to those who share our commitment to passing a Welsh Budget that works for everyone.”
The draft local government settlement will be published later in November. The Final Budget will be published on 20 January 2026, with the Senedd vote scheduled for 27 January.
