Posted: Tue 14th May 2024

Wales records sharpest business growth in 12 months

News and Info from Deeside, Flintshire, North Wales

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Wales’ business activity grew at its fastest pace in a year, according to the latest NatWest Wales PMI Business Activity Index. The index, which tracks the month-on-month change in the combined output of the region’s manufacturing and service sectors, rose to 50.8 in April from 50.3 in March.

This marginal growth in activity was attributed to a rise in new orders and increased customer confidence. However, the pace of expansion remained below the long-run average of the series and was weaker than the UK trend.

Private sector firms in Wales experienced back-to-back expansions in April, following a solid upturn in March. Increased marketing efforts and a boost in customer confidence contributed to the rise in new orders. Despite a slower growth rate compared to March, this was still the second-fastest increase in a year. Among the 10 UK areas recording growth in new sales, only Scotland had a slower expansion.

Business confidence among Welsh companies improved at the start of the second quarter, with firms anticipating greater output over the next 12 months. This optimism was driven by expectations of new customer wins and stronger client demand. Confidence levels reached the second-highest point in a year, although they remained below the UK average.

Staffing levels at Welsh businesses remained broadly unchanged at the start of the second quarter, following a slight increase in March. This stagnation in workforce numbers was consistent with the UK-wide trend. Companies noted that while new hires were needed to handle increased workloads, they often did not replace voluntary leavers to cut costs.

Welsh firms reported a further decline in outstanding business in April, with the rate of decline accelerating from March. Some businesses stated that subdued new order inflows allowed them to process incomplete work more efficiently. Despite this, the pace of contraction was the second-fastest among the 12 monitored UK areas, slower only than Yorkshire & Humber.

Cost pressures intensified for Welsh private sector firms at the start of the second quarter. Input prices rose at the fastest rate since last May, driven by higher raw material costs and increases in the National Minimum and Living Wages. The pace of cost inflation was in line with the UK average.

In response, Welsh businesses raised their output charges sharply in April. The increase in selling prices was attributed to passing on higher costs to customers. Although the rate of charge inflation slowed to its lowest in three months, it remained above the series average and was only slightly weaker than the UK trend.

Jessica Shipman, Chair of the NatWest Cymru Regional Board, commented, “April data signalled a sustained rise in new business at Welsh companies, as demand conditions strengthened again. Although the pace of expansion eased, growth supported a faster upturn in business activity – and one that was the sharpest in a year. Moreover, business confidence in the year-ahead outlook picked up to the second-highest for a year amid hopes of further improvements in customer demand.

“Wage pressures drove cost inflation in April, as a larger increase in the minimum and National Living Wage pushed total input prices up at the fastest rate since May 2023. Firms were largely able to pass through higher costs to customers, however, as charges rose at a further elevated pace.”

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