Welsh business activity grows as inflation eases, NatWest report shows
Welsh business activity grows as inflation eases, NatWest report shows
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Welsh business activity returned to growth in June, according to the latest NatWest UK Regional Growth Tracker, offering cautious optimism as the country seeks to build on a slow but stabilising recovery from recent economic turbulence.
The monthly report, which analyses economic conditions across the UK based on purchasing managers’ indices (PMIs), shows that Wales recorded a Business Activity Index score of 50.5 in June, above the neutral 50.0 threshold that marks growth from contraction. It signals the first expansion in activity since earlier in the year, positioning Wales among the eight UK regions that saw business growth last month.
New business activity in Wales also improved, with the New Business Index reaching 53.7, the third highest across all UK regions. The increase reflects a healthier pipeline for Welsh firms, likely driven by recovering domestic demand and easing cost pressures.
“New business either rose or was on a more stable footing compared to earlier in the year,” said Sebastian Burnside, Chief Economist at NatWest. “This suggests that recovery momentum is returning in parts of the UK, including Wales.”
However, expectations for the next 12 months were more muted. Wales recorded a Future Activity Index score of 55.0, placing it toward the lower end of UK regions in terms of business confidence. Still positive, the figure suggests a degree of caution among firms amid lingering economic uncertainty.
Despite the uptick in new orders, employment levels in Wales dipped again, with the Employment Index at 45.5—well below the growth threshold. This reflects broader UK-wide trends, as most regions reported staffing reductions in June, citing cost pressures and underutilised capacity.
Wales also experienced a modest decline in backlogs of work, with an Outstanding Business Index reading of 45.4, indicating limited pressure on operational capacity. This reinforces the view that many Welsh firms are still operating below full output potential.
One of the more encouraging trends in the report is the continued easing of inflation. Welsh businesses reported slower increases in both input and output prices, with Input Prices Index at 62.2 and Output Prices Index at 53.0. While still indicating rising costs, both figures mark a continued downward trend from earlier peaks.
“Businesses in all areas have been able to make smaller and smaller price increases of their own in recent months, relieving some of the pressure on demand,” Burnside said.
This softening inflation environment could help restore consumer confidence and improve spending patterns in the months ahead.
Across the UK, the East of England, South West, and London led the recovery, with Wales sitting just behind regions like Scotland and the West Midlands. Wales’ position on the business cycle is categorised as “recovery”, meaning the region is growing again, but at a slower pace than its six-month average.
NatWest’s regional tracker surveys firms in both the manufacturing and services sectors, providing one of the most closely watched indicators of regional business conditions.
While the Welsh economy still faces headwinds, particularly around employment and business confidence, the latest figures suggest that activity is heading in the right direction. The growth in new business and easing of inflationary pressures may help lay the groundwork for stronger performance in the second half of 2025.
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