Prince Charles visits Rachel’s’ Organic Dairy in 2017, a successful Ceredigion business founded in 1982, but taken over by Americans in 1999.

Why do so many Welsh businesses get taken over? Just when you think a Welsh company has established itself in an interesting new niche or is proving successful and innovative, along comes a bigger company, almost invariably from outside Wales, to swallow it up.

Just a few weeks ago Broomfield Alexander, the Welsh accountancy practice, joined rival firm Baldwins, itself part of a wider, London-based business services group, Cogital. The hundred year Cardiff-based practice will continue to operate as before, advising businesses in Wales but as part of a bigger organisation. It could lead to new business and more jobs for Wales. Control, however, will have passed outside.

Service sector companies – like Broomfield Alexander – which were previously seen as much less likely to be absorbed than their manufacturing counterparts, have been disappearing into non-Welsh ownership for some time. Remember Cardiff solicitors Leo Abse & Cohen? Since 2015 they have been part of Australian group Slater+Gordon. Or, Wrexham-based recruitment specialists, Gap. They are now owned by Japanese staffing company, Trust Tech.

There have been many other recent examples, from roadbuilding contractors Alun Griffiths (now part of Tarmac, itself a subsidiary of Irish aggregates giant CRH) to bus operator N.A.T., which the oddly-named Singapore group, Comfort Delgro (also a London red bus operator) acquired in 2018. Ownership of the rock that Wales is made of can be traded, too. In April this year Aim-listed Sigma-Roc took a 40 per cent stake in Narberth quarry owner, G.D. Harries & Son, with a view to ultimate full control.

Does it matter? One can hardly blame owners, who may have devoted their working lives to building a business, making considerable sacrifices on the way and risking their own funds, family life and security, from accepting offers, particularly if, in the case of privately-held businesses, there are no obvious successors within the family or the management. It is after all their property and with appropriate limitations they should be able to dispose of it as they see fit. Perhaps we should view it as a tribute to Welsh entrepreneurs, of whom there are now far more than there used to be, that they appear on the radar of businesses elsewhere, not just when they are in need of rescue but when they seem to have developed products or found niches that acquirers find interesting and wish to add to their own portfolio.

Yet, the nagging feeling remains that something important is being sacrificed in this apparently one-way traffic and that what is being lost could be helping to develop a more rounded, more prosperous and more competitive Welsh economy. The consequences are wider than that, too.

A whole ecosystem surrounds successful companies, creating jobs and other opportunities beyond the core business. This is put at risk when firms disappear inside bigger rivals. Companies headquartered in Wales need suppliers, from cleaners and caterers, marketing and public relations advisers, personnel specialists, builders, plumbers and electricians to IT specialists, accountants, auditors, solicitors and a range of other consultants. Many of these relationships will remain intact but inasmuch as a strong motivation for take-overs is rationalisation and efficiencies it is inevitable some of these services will henceforward be organised from the central location and will involve the introduction of external providers, often headquartered in the big English cities.

It would, of course, matter less if Welsh businesses were active in acquiring businesses across the border and further afield. One or two, such as Wynnstay and Leekes, have been, but the majority are not. Our long and porous border is more non-return valve than two-way pipeline.

It is, it must be conceded, not just a Welsh problem. A similar case could be made about the drift into overseas ownership of businesses that most people would imagine were quintessentially British, from Lucozade to Lea & Perrins. What has been happening in Wales is in many ways the British experience writ small, and part of a process – consolidation across business sectors – that has been happening since the beginning of capitalism, but which has accelerated enormously in recent years under the impact of globalisation and its enabling handmaid, technology.

The food industry offers one example of this process at its extreme so it is perhaps worth examining the drivers there, especially as food is one of the areas in which Wales would like to believe it has a strong future. At the primary growing level, output is increasingly coming under the control of giant groups such as the big grain producers and traders, Cargill and Archer Daniels in the US and Europe’s Louis Dreyfus; a big chunk of the global food processing that follows is handled by a small number of multinationals such as Nestle, Unilever, General Mills, Nissin and Danone; and it is increasingly sold by national supermarket oligopolies led in their different territories by Tesco, Walmart, Carrefour and Aldi.

All these groups like talking with similarly-sized organisations. The supermarkets want to deal with giant processors as big as themselves for most of their requirements so unless producers in Wales and elsewhere are part of bigger food manufacturing groups they will be confined to the “local produce” racks at the end of an aisle deep inside the store. This is why Rachel’s Dairy, Brecon Carreg and other Welsh waters, (Ty Nant, Princes Gate) and meat processors, such as Oriel Jones a’i Fab among others, have ended up in big corporate hands and why it is so difficult to build scale and remain independent. (It is possible to stay local as the example of West Country-based Yeo Valley Farms, a rival yogurt supplier to Rachel’s Dairy, shows, but it requires a lot of determination and support.)

This effect is apparent even with apparently huge brands if their owners see no other way of taking them outside their domestic market. HP Sauce, a British institution, but largely unknown outside the UK, is now owned by Kraft-Heinz, the world’s fifth biggest food and beverage company, and HP production has been incorporated into a much bigger plant in the Netherlands, as attempts are made to take it to a wider world consume base.

This illustrates another dilemma, especially where it is the brand rather than the business itself which is the acquirer’s target. If provenance is not important (as it is in some cases, such as Scotch whisky) economies of scale will usually demand a shift to other bigger, more central locations as part of a rationalisation process. And for reasons of distribution, as we frequently see within the EU, this will usually mean the countries of central Europe or eastern Europe, or close to huge container ports, such as Rotterdam and Hamburg, and to Continent-wide road and rail networks. Peripheral areas will invariably lose out, as we may yet see when the key decisions in the projected Tata Steel-Thyssen-Krupp steel merger are made.

The trend towards scale operations is occurring not just in the food industry, however. Companies big, medium-sized and small, across manufacturing and services now search for businesses engaged in similar activities, and which appear to have developed a successful strategy or interesting new products and innovations. This is often done as an alternative to carrying out expensive internal development work. The pharmaceutical industry has taken this further than most, slimming down product portfolios, closing or moving operations and seeking out university spin-outs and other start-ups for new drug discoveries rather than risk spending large amounts of time and money on research that may prove fruitless.

With its modest population and small industrial base Wales is hard-pressed to influence these developments but does this mean it will have to remain a passive bystander, buffeted by whatever trends occur across global business? Can its small businesses never hope to become medium-sized and its bigger businesses never make it on to the world stage? It will be tough but some countries – Ireland and Denmark are examples – have managed to create strong niches for themselves in global business alongside the global brands, despite having relatively small populations of around 5m. They are also now much wealthier than Wales. We need to understand how they have achieved this success, while Wales has remained a largely dependent economy, constantly requiring external investment and support to change and develop.

The scale difference is apparent from the turnover figures of the top companies in the three countries. Ireland’s CRH, founded in 1970 and now established in international markets, had a turnover last year of €27bn., and Development Capital Corporation, founded 1976 stands at €13.9bn. Denmark’s AP Moeller-Maersk weighed in at €192bn and second-placed NovoNordisk at €117.9bn. Wales’s s two biggest domestic companies, Iceland and Admiral, reached only £3bn and £2.96bn respectively. (In April this year the Euro stood at about 1.16 to sterling.)

A start has perhaps been made in Wales and this offers some hopes for the future. The Welsh economy has transformed over recent decades, as the multinationals that moved in during the post-coal era have retreated to their home countries or moved operations to eastern Europe or Asia. With encouragement from Welsh Government, local government, business representative organisations, universities, award schemes, and the Welsh media, and especially the Western Mail, a new ecology of small and medium-sized companies has sprung up. More Welsh people have decided to go into self-employment for one reason or another and many have done well and created jobs for others. Recognition has come, too, from politicians including Plaid Cymru leader, Adam Price, of building the Welsh economy around grounded companies – those that have been formed in Wales and have good reason to continue to be based here.

We need, however, a much better understanding of the processes at work that might bring greater success, leading ultimately to an economy that will much more closely resemble the successful Irish and Danish, and other successful small nation European models. As well as ensuring firms in Wales can secure access to the funding they require and putting in place appropriate financial institutions, other even more deep-seated issues need to be addressed. Does our school system, for example, prepare young people well enough for life in a what has become a largely post-industrial economy? Are our universities working closely enough with Welsh industry on future products and services? Can we do more to retain Welsh young people within the Welsh university system or to attract Welsh graduates back to Wales?

Are the new businesses we are creating operating in areas that are likely to be relevant to future? In other words, are enough of them going to add value rather than merely fulfil a service or manufacturing need that could be overtaken by artificial intelligence in the decades ahead or be swept away by bigger businesses elsewhere? Just as importantly, does an historical animosity towards capital linger and hold us back? Are we comfortable as a society with individual success and wealth? Do we use rugby as a proxy for success elsewhere, believing that if all goes well at the Principality Stadium, we do not need to try as hard in other areas?

The Scots recognise the importance of becoming a thoroughly modern economy and leveraging their universities to this task. In March the Scottish Government asked Professor Sir Anton Muscatelli of Glasgow University to report on how Scotland’s universities can lead economic growth through industrial partnership and advise how Scotland can learn from other innovative European countries. The research will be short and sharp, reporting in the autumn this year to government, the universities and public agencies. (Compare and contrast the time taken to decide whether or not to build a new road around Newport.)

On his appointment Sir Anton said, “Already across the country exciting partnerships with major industry, SMEs, spin-outs and social enterprises are underway, with many success stories to be celebrated. I hope that the outcomes from this report will offer the chance to build on these successes, learn from international best practice and put Scotland on the road to becoming the best place in the world for industry to partner with universities.” Wales should be doing the same, not waiting until 2025 and inviting a team from Scotland to come down to give us lessons in what they have achieved.

Maybe we will need to have a longer spell as a feeder economy, creating businesses that will grow and then attract outside attention. Perhaps it is going to take decades before enough small companies in Wales grow to become medium-sized businesses capable of looking beyond Welsh borders to expand. If this is the case, we need to find ways in which the funds released from Welsh businesses that are sold get invested back in Wales in even more innovative products, creating wealth for more people going forward. We need to ensure that at least some of the businesses that are developed become the agents of consolidation in their sector not the consolidated.

But perhaps most of all we need the capacity within our universities to carry out relevant research and the willingness to commission it. The economic departments of our Welsh universities, unless I am much mistaken, can tell you all you want to know about a range of topics from the macro-economic policy of developing economies to multiple deprivation in Rhyl West. They teach business students from around the world who can then return to help their own economies prosper. There is a serious gap, however, in knowledge about the Welsh business sector, its size, its constituents, its characteristics, its requirements, its prospects, its strengths, its weaknesses, where investment is going and where it is needed.

As well as having world-class universities Scotland benefits from having a dedicated institute studying the Scottish economy – the Fraser of Allander Institute. We may not have had in Welsh ownership a House of Fraser to provide the core funding for such an institution – and it is most unlikely the current HoF owner, Mike Ashley would fund such a body today, given the parlous state of department store finances. Are there, however, no Welsh-based or Welsh-born or other charitable donors who would be willing to do so? Should the Welsh Government take the lead? Properly structured it could provide the key to telling us how to structure the development of a profitable Welsh economy for the rest of this century and beyond. It could repay the investment handsomely.

• Rhys David is Chair of Nova Cambria.