Welsh private sector output grows at UK’s fastest rate

WELSH private sector output expanded as the fastest rate in the UK last month, according to latest research from NatWest.

Its Wales business activity index – a seasonally adjusted index that measures the month-on-month change in the combined output of manufacturing and service sectors – registered 61.5 in October, up from 57.1 in September, to signal a marked expansion in output.

The rise in business activity was the sharpest for four months and the steepest of the 12 monitored UK areas. Anecdotal evidence suggested that the upturn was due to greater client demand and a stronger increase in new business.

Welsh private sector firms reported the steepest rise of any nation or region of the UK, in new orders

Output expectations for the year ahead at Welsh firms remained strongly upbeat at the start of the fourth quarter. Companies stated that optimism was linked to hopes of a further uptick in client demand and stabilisation in supply chains. That said, the degree of confidence dropped to a three-month low, and was below the UK average.

October survey data also signalled a strong upturn in Welsh private sector employment. Higher workforce numbers were attributed to greater new order inflows and increased business requirements. Nevertheless, ongoing labour shortages persisted, with firms noting challenges hiring suitable candidates for current vacancies and a high turnover of staff. The rate of job creation eased to the slowest since May and was among the softest of the 12 monitored UK areas.

However, the rate of inflation accelerated to the fastest in almost 21 years of data collection.

Gemma Casey, NatWest ecosystem manager for Wales, said: “Welsh private sector firms registered a positive start to the fourth quarter with a marked rise in business activity following stronger new order growth and strengthening client demand. As a result, the rise in backlogs of work accelerated at a high pace. That said, the rate of job creation slowed to a five-month low as firms noted that labour shortages hampered companies’ abilities to fill vacancies with suitable candidates.

“Inflationary pressures strengthened as raw material and labour shortages, alongside greater transportation and fuel costs, pushed input prices higher. Encouragingly, firms were able to pass on higher costs to their clients through the fastest rise in charges in almost 21 years of data collection. Meanwhile, output expectations remained upbeat with optimism linked to a further uptick in demand and stabilisation in supply chains.”