NEW figures have revealed a sharper fall in Welsh business activity, with firms cutting jobs at the fastest rate since September 2020.
The latest NatWest Wales Growth Tracker showed that while the decline in new orders eased for the second month running, overall output fell more quickly in May as businesses faced higher costs, weaker demand and growing uncertainty.
The headline Wales Business Activity Index fell to 45.8 in May, down from 47.9 in April. Any reading below 50 indicates contraction.
The drop was the sharpest since September 2025 and placed Wales among the weakest-performing UK areas, with only the East Midlands and Northern Ireland recording faster falls in output.
JOB CUTS DEEPEN
Welsh private sector firms also reported a further fall in staffing levels, with the rate of job shedding the steepest in almost six years and the sharpest of all 12 UK nations and regions monitored.
Businesses said lower new order intakes and the higher cost of employment were behind the reduction in headcounts.
Backlogs of work also continued to fall, suggesting weaker demand was allowing firms to clear outstanding orders more quickly.
ORDERS STILL FALLING
New sales fell for the fourth month running, although the rate of decline eased and was only slight.
NatWest said part of the improvement may have reflected temporary stockpiling by customers amid higher prices and supply challenges, rather than a sustained recovery in demand.
Business confidence also weakened, although firms remained generally optimistic that output would rise over the next 12 months.
INFLATION PRESSURE
The report said input costs rose at the sharpest pace since November 2022, driven by higher fuel, energy and material costs.
Welsh firms also increased their selling prices at a faster rate, with charge inflation reaching its highest level for more than a year.
Jessica Shipman, Chair of the NatWest Cymru Board, said: “May data indicated a softer decline in new orders at Welsh firms, however, some of the uplift in the seasonally adjusted New Business Index stemmed from a temporary bout of stockpiling at customers amid higher prices and supply challenges.
“In fact, activity levels dropped at a sharper pace and employment contracted at a rate not seen since September 2020.
“Although still confident of output growth in the coming 12 months, spare capacity and greater uncertainty led firms to lower their expectations for the year-ahead outlook.”
She added that inflationary pressures were continuing to influence business and customer decisions, with the conflict in the Middle East pushing up material, fuel and energy costs.
EXPORT CONDITIONS IMPROVE
There was better news for exporters, with the Wales Export Climate Index rising from 50.7 in April to 51.1 in May.
That signalled the strongest improvement in export conditions for three months, supported by stronger output growth in Ireland and the Netherlands.
Activity also continued to rise in the United States, although Germany and France remained in contraction.
The NatWest Wales Growth Tracker is compiled by S&P Global from responses to questionnaires sent to Welsh companies in the manufacturing and services sectors.