Welsh lake consuming small wood (5)
I believe the answer is:
balsa
'wood' is the definition.
(balsa is a kind of wood)
'welsh lake consuming small' is the wordplay.
'welsh lake' becomes 'bala' (I've seen this before**).
'consuming' is an insertion indicator.
'small' becomes 's' (abbreviation - e.g. clothes size).
'bala' enclosing 's' is 'BALSA'.
(Other definitions for balsa that I've seen before include "Wood used by model makers" , "Tree yielding light wood" , "Strong lightweight wood" , "Very light timber" , "Lightweight timber" .)