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Home » Big Fall In Welsh Private Sector Output Show Latest NatWest Index

Big Fall In Welsh Private Sector Output Show Latest NatWest Index

Private sector output has fallen in Wales at the fastest rate in more than two years.

The headline NatWest Wales Business Activity Index, registered 45 (anything below 50 denotes contraction) in October, down from 48.4 in September, signalling the biggest downturn in output at Welsh firms since February 2021.

The rate of decline accelerated amid reports of worsening demand conditions and a faster fall in new orders. With the exception of the North East, Welsh manufacturing and services companies registered the steepest drop in activity of the 12 monitored UK areas.

They also signalled a marked decline in new business at the start of the fourth quarter. The rate of contraction accelerated notably to the fastest since early 2021. Moreover, of the 12 monitored UK nations and regions, only Yorkshire & Humber recorded a steeper drop in new order inflows.

Weak client demand reportedly drove the downturn amid challenges associated with the cost-of-living crisis and reports of order postponements.

October data signalled stronger optimism regarding the outlook for output over the coming year among Welsh firms. Confidence reportedly stemmed from hopes of investment in capacity expansion and improved demand conditions, especially among customers in Europe. Although the level of positive sentiment picked up, it was below the long-run series average and among the weakest of the 12 monitored UK areas.

Welsh businesses registered a third successive monthly decline in workforce numbers during October. The rate of job shedding was broadly in line with that seen in September and was the second-sharpest of the 12 monitored UK areas, behind the North East.

A slowdown in new orders led firms to not replace voluntary leavers, and in some instances, make workers redundant. Manufacturers and service providers alike cut staffing numbers.

October data indicated a further contraction in outstanding business at Welsh firms, thereby extending the current sequence of decline to a year-and-a-half. The rate of decrease slowed to the weakest since July, but was stronger than the series average. Lower new orders enabled firms to clear backlogs, according to panellists.

Jessica Shipman,NatWest Cymru regional board chair, said:“It’s encouraging to see that hopes of stronger demand conditions domestically and internationally has spurred business confidence, which picked up from September’s recent low.

“In the here and now, however, Welsh firms continued to signal one of the worst performances of the 12 monitored UK areas, as business activity tumbled following a sharper drop in new orders. Output and new business fell at the steepest rates since early-2021, as the cost-of-living crisis stymied customer spending and order postponements were noted.

“Meanwhile, paces of increase in cost burdens and selling prices gained momentum as greater business expenses were passed through to customers. Firms continued to seek to cut costs, however, as job shedding broadened. Alongside the non-replacement of voluntary leavers, there were some reports of redundancies as new orders dwindled.”

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