July data signalled a fresh increase in business activity at Welsh firms, according to the NatWest Cymru Growth Tracker, following a five-month period of contraction.
The headline Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the area’s manufacturing and service sectors – posted 50.5 in July, up from 47.4 in June, to indicate a renewed increase in output levels. Although only marginal, the pace of growth was the quickest since June 2025. Activity was reportedly boosted by signs of recovering demand conditions.
Although new orders fell for the sixth month running, the pace of decline was only fractional and the slowest in the current sequence of contraction.
Hopes of stronger demand boosted output expectations among firms, which rose to their highest in three months. At the same time, the pace of job shedding slowed to the weakest in 2026 to date.
Inflationary pressures, meanwhile, eased in July. Rates of increase in both input prices and output charges cooled to the softest since February.
Jessica Shipman, Chair, NatWest Cymru Board, said:
“Welsh businesses signalled glimmers of positivity at the start of the third quarter as activity levels returned to growth and the contraction in new orders eased to only a fractional pace. Reports of stronger demand conditions also boosted business confidence which ticked up to a three-month high.
“That said, caution remained, especially amid geopolitical uncertainty which continues to drive inflationary pressures and customer hesitancy. The level of optimism was well below those seen earlier in the year and firms continued to cut workforce numbers as, despite cooling, rates of increase in costs and output charges were historically elevated. Some reprieve for companies, however, came through the slowest uptick in input prices since February.”
Welsh businesses registered a renewed expansion in activity during July. Although only slight, the pace of growth was the fastest in over a year. The rate of upturn in output was softer than the UK average, however.
Welsh private sector firms recorded a sixth consecutive monthly fall in new orders at the start of the third quarter. Anecdotal evidence suggested that the decrease was due to customer hesitancy and uncertainty. The downturn in new business in Wales contrasted with the UK trend which pointed to a marginal expansion.
At the same time, business confidence at Welsh private sector companies improved to a three-month high during July. Optimism was reportedly underpinned by hopes of new client acquisitions and efforts to drive new sales through marketing. Nevertheless, expectations were subdued in the context of the long-run series and UK averages.
July data indicated a solid fall in staffing levels at Welsh private sector firms. Panellists often stated that lower workforce numbers were due to cost considerations and subdued client demand. At the same time, only the East of England recorded a steeper pace of job cuts of the 12 monitored UK areas.
Extending the trend seen in each month since May 2022, Welsh businesses registered another decrease in backlogs of work at the start of the third quarter. Of the 12 monitored UK areas, Welsh businesses recorded the steepest decline in work-in-hand.
Operating expenses at Welsh businesses continued to increase at a marked pace at the start of the third quarter. Panellists stated that higher input prices were driven by the impact of geopolitical tensions, especially on costs for commodities and fuel. That said, the pace of inflation eased to the weakest since February and was broadly in line with the UK average.
Similarly, the pace of increase in output charges remained historically elevated in July, but softened to the slowest in five months. Companies commonly noted efforts to pass through greater costs to customers via higher selling prices. The rate of charge inflation was slightly softer than the UK average.
