Latest Cymru Growth Tracker data from NatWest signalled a fresh rise in output at the start of 2025 with business confidence remaining positive as companies headed into a new trading year.
At 50.7 in January, 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 – rose for the third month running to post above the 50.0 neutral mark. Up from 48.9 in December, the latest data indicated a marginal expansion in output at firms in Wales, and the first increase in activity since last August.
Business confidence remained upbeat in January and the rates of decline in employment and backlogs also softened.
Meanwhile, inflationary pressures intensified, as costs and charges rose at quicker and historically elevated rates. Moreover, the pace of charge inflation was the sharpest in ten months as firms sought to pass through greater costs to customers.
Jessica Shipman, Chair, NatWest Cymru Regional Board, said:
“January data saw a return to output growth at Welsh businesses, with reports of improvements in the sales environment in specific sectors driving the expansion in activity.
“Firms continued to show caution regarding employment but firms were confident that demand conditions will improve as the year progresses.
“Although elevated in the context of the series history, Welsh firms saw the slowest uptick in cost burdens of the 12 monitored UK areas. Output charges also increased, and at a pace only slightly slower than the UK average, as firms sought to protect margins.
“The Bank of England’s interest rate cut last week means that policy is now less restrictive, with further loosening expected in the year ahead.”
Speaking to Business News Wales, Sebastian Burnside, Chief Economist of NatWest Group, summarised what the report reveals:
The rise in business activity at Welsh firms was in line with the UK trend which signalled an expansion in output in January. That said, only four of the 12 monitored UK areas registered an upturn in activity (London, the North East, the South West and Wales). Panellists noted that demand picked up in certain sectors despite the overall sales environment remaining subdued.
Welsh private sector firms signalled another, albeit marginal, contraction in new orders in the opening month of 2025. Although slightly faster than that seen in December, the pace of decline was weaker than the UK average. In fact, of the ten monitored UK areas to see a fall in new sales, the rate of decrease in Wales was the slowest.
Nonetheless, businesses were confident of a rise in output over the coming year amid hopes of stronger economic conditions and planned expansions to company capacity. Of the 12 monitored UK areas, the North East, Scotland and Northern Ireland recorded weaker positive sentiment in the outlook.
Welsh private sector firms registered a fifth successive monthly decline in workforce numbers at the start of 2025. The rate of job shedding softened, but was among the sharpest of the 12 monitored UK areas. Only the East of England and the West Midlands recorded steeper job cuts.
Although among the fastest in the last year, the rate of decline in backlogs of work eased in January. Lower new orders enabled firms to process their incomplete business, as work-in-hand fell at a pace that was quicker than both the series and UK averages.
Meanwhile, input prices rose at the fastest pace since April last year amid unfavourable exchange rate movements, higher labour costs and greater supplier prices. That said, the rate of cost inflation was the slowest of the 12 UK areas monitored by the survey.
In contrast to the trend for input prices, Welsh firms did not see the slowest rise in output charges during January. Of the monitored UK areas, Scotland and Northern Ireland registered softer upticks in selling prices.
