Businesses in Wales enjoyed a faster upturn in new orders and upbeat demand in September, according to the latest NatWest Wales Growth Tracker.
September data also signalled a third successive monthly expansion in new business at Welsh firms. The pace of growth quickened to the joint-sharpest since March – alongside April 2024 – despite being only modest overall. Anecdotal evidence attributed the rise in new orders to stronger client demand.
Sebastian Burnside, Chief Economist of NatWest Group, summarised the report’s findings for Business News Wales.
Welsh private sector businesses recorded a renewed decrease in staffing numbers in September, thereby ending a six-month sequence of job creation. Panellists linked the drop to the non-replacement of voluntary leavers.
Meanwhile, companies raised their selling prices at a historically elevated pace that was the sharpest since May. Firms noted that more upbeat demand conditions allowed them to pass-through higher costs to customers.
Jessica Shipman, Chair, NatWest Cymru Regional Board, said:
“The latest report shows there was much to be positive about in September. A faster rise in new orders and uptick in business optimism following greater confidence at customers is good news. More upbeat demand conditions also allowed firms to raise their selling prices at a sharper rate in a bid to protect margins amid a slower increase in cost burdens.
“But despite greater confidence among Welsh firms, evidence of spare capacity led to a renewed round of job shedding. Growing new order inflows and potential strain on capacity from supply issues may push companies to expand staffing numbers in the coming months, however.”
Performance in relation to UK
The fall in output was only marginal overall, but Wales was alone in posting a contraction, as the other 11 areas of the UK monitored by the survey recorded expansions in business activity.
Although quickening, the pace of increase in new orders was slower than the UK average.
A buoyant sales environment also supported greater optimism among Welsh businesses in the outlook for output over the coming year in September. The degree of confidence picked up from August and was historically elevated despite being slightly below the UK trend.
Meanwhile, the fall in workforce numbers was modest and the steepest since January. Moreover, the decline was the sharpest of the 12 monitored UK areas.
Evidence of spare capacity remained as backlogs of work contracted further, extending the current period of decline to almost two-and-a-half years. Although solid, the pace of depletion eased notably to the slowest since December 2022. Nonetheless, of the 12 monitored UK regions and nations, Welsh firms registered the second-fastest fall in incomplete business, with only Yorkshire & Humber recording a quicker decrease.
Welsh businesses signalled an easing of cost pressures at the end of the third quarter, as the pace of cost inflation slowed to the joint-weakest since November 2023 (alongside June 2024 data). The rate of increase was marked overall and in line with the UK average, as firms linked higher costs to greater wage bills and increased supplier prices.
With regards to selling prices, Welsh firms recorded an acceleration in the pace of output charge inflation to a rate that was broadly in line with the UK average.
