Welsh firms report a fall in output

NatWest.

Welsh businesses experienced fall in output, new research from NatWest shows.

Its Wales business activity index – a seasonally adjusted index that measures the month-on-month change in the combined output of the manufacturing and service sectors – registered 48.0 in December, down from 48.5 in November. Anything below 50 denotes contraction.

Welsh businesses also recorded a fifth consecutive monthly decrease in workforce.

Weak customer demand led firms to reduce staffing numbers, with redundancies mentioned by panellists. The fall was due to weak client demand, economic uncertainty and a further decrease in new order inflows. The sharper decline in activity in Wales contrasted with the wider UK trend, which indicated a moderate upturn.

Welsh firms recorded the second-fastest drop in output behind the North East of England. They registered a further contraction in new business at the end of 2023, although the rate of decline eased for the second successive month. The continued drop in new orders was linked to subdued demand conditions and customer postponements.

The pace of decrease was modest and the slowest since September, though it contrasted with the UK average which indicated a moderate expansion in new business.

However, December’s data signalled an improvement in expectations regarding the outlook for output over the coming year with a the rate at a five-month high – although lower than for the UK as a whole.

Companies noted that positive sentiment was due to hopes of a pick up in customer demand, investment in product diversification and facilities, and the acquisition of new clients.

Jessica Shipman, chair of NatWest Cymru board, said: The final month of the year signalled more upbeat sentiment among Welsh firms regarding activity in 2024 as business expectations were the strongest since July, despite output and new orders continuing to contract.

Companies anticipated that more accommodative demand conditions and investment in new products and facilities would drive output in the year ahead.

“Although the pace of decrease in new business slowed, reduced backlogs of work led to dwindling activity and the joint-fastest drop in employment since October 2020 as business requirements waned further.

“Meanwhile, rates of inflation remained sticky as input costs and output charges rose at faster paces. Sharper hikes in component and raw material costs were passed through to customers despite a challenging demand environment.

“Nonetheless, rates of increase were among the weakest in around three years and much slower than the 2023 average as inflationary pressures eased substantially from the start of the year.”