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Business News Wales
2 days ago
- Business
- Business News Wales
Strongest Rise in Welsh New Business Since March 2023
Welsh businesses saw a further rise in output during June, according to the latest Cymru Growth Tracker data from NatWest, but growth in activity slowed despite a sharper upturn in new sales. At 50.5 in June, the headline Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region's manufacturing and service sectors – fell from 51.5 in May, to signal only a slight expansion in output at Welsh private sector firms. Meanwhile, the rate of increase in new orders accelerated to the sharpest in over two years. Despite more favourable demand conditions, firms were less confident in the outlook for output over the coming year and registered another strong fall in employment. On the price front, input costs and output charges increased at softer rates in June. Although still historically elevated, output prices rose at the weakest pace since October 2024. Sebastian Burnside, Chief Economist of NatWest Group, summarised the report's findings for Business News Wales: Jessica Shipman, Chair, NatWest Cymru Regional Board, said: 'Business conditions appear to be improving for Welsh firms, as new order growth accelerated to the fastest in over two years and companies raised their output levels in turn. That said, the rise in activity was only slight. At the same time, previous hikes to the Minimum Wage and National Insurance contributions continued to weigh on business decisions as employment contracted again and confidence in the outlook was dampened amid concerns regarding client spending, and efforts to control costs. 'Inflationary pressures eased further from the recent highs seen in April, meanwhile. In a bid to drive sales, selling prices rose at the weakest rate since last October, as firms noted prioritising competitiveness over protecting their margins. In fact, of the 12 monitored UK nations and areas, only Yorkshire & Humber recorded a slower uptick in charges.' Performance in relation to UK The rate of output growth was slower than the UK average. Anecdotal evidence suggested that stronger demand conditions supported the upturn, however. Private sector firms in Wales signalled a second successive monthly expansion in new orders during June. The pace of growth quickened notably to the steepest in over two years. Moreover, the rise in new sales was the second-fastest of the 12 monitored UK nations and regions (behind the East of England). As well as being below the long-run series average, the level of optimism was the second-weakest of the 12 monitored UK nations and areas, ahead of only the North East. Surveyed firms stated that customer uncertainty and reduced client spending weighed on positive sentiment. A higher cost to employ staff following hikes to the Minimum Wage and National Insurance contributions reportedly led to cost-cutting initiatives and a reduction in headcounts. Of the 12 monitored UK nations and areas, Welsh firms recorded one of the sharpest drops in employment. The pace of job shedding eased, however, to the slowest since last November. Despite a rise in new orders, firms were able to continue working through their backlogs during June. The rate of depletion was among the slowest in over a year, having softened from that seen in May. Nonetheless, the pace of decline was strong overall and quicker than the UK average. Panellists mentioned that greater prices for raw materials and higher transportation fees coincided with the further impact of hikes in wage bills and labour costs on balance sheets. That said, the pace of input price inflation eased to the slowest in 2025 to date and was weaker than the UK average. At the same time, the rate of increase in output charges softened as firms opted to remain competitive and drive new sales rather than protect margins. The pace of inflation was the least marked since October 2024. Moreover, of the 12 monitored UK nations and areas, only Yorkshire & Humber recorded a slower hike in output charges.
Business News Wales
16-05-2025
- Business
- Business News Wales
Regional Growth Tracker Reveals Back-to-Back Declines in Output
Latest Cymru Growth Tracker data from NatWest signalled back-to-back declines in output, as activity fell at a faster pace in April. The headline Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region's manufacturing and service sectors – dropped to 48.1 in April, down from 49.2 in March, to signal a modest decrease in business activity. Firms have reported that increased global economic uncertainty, particularly related to US tariff announcements, is significantly impacting demand across various regions. This is reflected in observations of reduced client activity and overall caution towards spending. Meanwhile, demand conditions remained subdued as new orders declined for the sixth month running. Lower new business dampened output expectations for the year ahead which were at their lowest for two-and-a-half years. At the same time, input costs and output charges rose at steeper rates, as firms noted hikes in wage bills and associated costs, especially. Input price inflation accelerated to the sharpest since February 2023. At the same time, the rate of charge inflation was the fastest in two years. The survey was conducted after US tariff announcements on 2 April, which, at the time, saw minimum tariff rates of 10% applied to imports into the US, as well higher so-called 'reciprocal' tariff rates on a number of countries. A subsequent announcement on 9 April saw a 90-day pause on most higher tariff rates. Sebastian Burnside, Chief Economist of NatWest Group, summarised the report's findings for Business News Wales. Sebastian Burnside, NatWest Chief Economist, said: 'The tracker this month reflects the challenges that economic uncertainty can create for UK businesses of all scales. 'Welsh businesses reported a challenging start to the second quarter, with demand falling amid a backdrop of economic uncertainty and rising prices. Output declined modestly and at a rate that was slightly faster than the UK average. 'It's encouraging that firms are still looking to the future with some optimism, although growth expectations are lower than they have typically been in the past. 'Rising labour costs have added to pressure on businesses, following April's increases in National Insurance contributions and minimum wages. As firms look to mitigate rising costs, we've seen average prices charged for goods and services increase at faster rates, as well as a greater focus on workforces. Labour markets in all areas of the UK have felt the impact to some degree in recent months, with only Scotland avoiding a fall in employment in April. 'We cannot ignore the backdrop during which this survey was carried out but regardless, as we've seen in the past, UK business is resilient and can always offer reasons for optimism throughout.' Performance in relation to UK Although modest overall, the fall in Welsh output levels was the fastest since November 2024 and was quicker than the UK average. Panellists noted that economic uncertainty and reduced purchasing power at customers weighed on overall demand. The rate of contraction in new business was only marginal, however, having slowed from March. Although comparing unfavourably with the series' long-run average, the pace of decline was slower than the UK trend. Output expectations among Welsh firms were among the least upbeat of the 12 monitored UK areas, meanwhile. Only the North East and Northern Ireland recorded lower positive sentiment in the year ahead outlook. Moreover, economic and geopolitical uncertainty dented optimism, as the degree of confidence dropped to the weakest since October 2022. Meanwhile, the rate of decline in headcounts quickened slightly and remained steep. Moreover, the pace of job cuts was faster than both the long-run and UK averages. Panellists stated that lower employment was due to the non-replacement of voluntary leavers due to cost considerations. A reduction in new orders reportedly enabled companies to clear unfinished work. Although strong and one of the sharpest of the 12 monitored UK areas, the pace of depletion slowed to the weakest since last September. Welsh private sector firms indicated a faster rise in average cost burdens at the start of the second quarter. As well as being quicker than the series average, the pace of increase was above the UK trend. Anecdotal evidence suggested that higher operating expenses stemmed from greater energy and wage bills. At the same time, selling prices also increased at a quicker pace in April. The rate of charge inflation was the fastest in two years and the second-sharpest of the 12 monitored UK areas, fractionally behind that seen in Northern Ireland. Companies stated that they sought to pass-through higher costs to customers.
