Welsh businesses saw some welcome release from cost pressures in June, with the rate of input price inflation easing for the first time in February and the decline in business activity moderating, according to the NatWest Welsh Cymru Growth Tracker. Although firms continue to face weak demand and economic uncertainty, the latest data suggests the worst of the recent slowdown in output cooled.
The headline Wales Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the area’s manufacturing and service sectors – posted 47.4 in June, up from 45.8 in May. Higher prices and reduced customer confidence amid economic and political uncertainty reportedly weighed on activity, according to panellists. The latest data indicated a softer decline in output levels at Welsh firms, however.
Meanwhile, new orders fell at a quicker rate in June. The solid contraction was the fastest in three months, with firms cutting workforce numbers again in response to lower new sales.
Although the pace of input cost inflation cooled to the weakest since March, it was well above the series average and among the steepest since November 2022. The rate of increase in charges was unchanged from May and the joint-sharpest in 14 months.
Jessica Shipman, Chair, NatWest Cymru Board, said:
“June’s data provided some welcome signs that pressures on Welsh business are starting to ease with the decline in output moderating and input cost inflation softening from the elevated levels seen earlier in the year. While firms continued to face challenging demand conditions, driven by geopolitical uncertainty and weaker customer demand, the latest figures suggest that recent pressures on output are beginning to soften.
“Businesses, nevertheless, remain cautious. New orders fell at a faster pace in June, contributing to further reductions in staffing levels and a softer outlook for the year ahead. Although cost inflation eased, it remained historically elevated and firms continued to increase selling prices where possible. With demand still subdued, many businesses will be looking for clearer signs of recovery before confidence returns.”
Performance in relation to UK
Welsh private sector firms recorded another monthly decline in business activity during June. The rate of contraction eased from May, but was sharper than the UK average.
June data signalled a fifth successive monthly decrease in new orders at Welsh private sector firms. The rate of decline quickened to the fastest since March and was sharper than that seen across the UK as a whole.
At the same time, companies recorded a slight downward adjustment to expectations for output over the coming year in June. The level of confidence dipped to a three-month low, contrasting with the wider UK trend where optimism picked up from May.
Welsh businesses signalled another marked rise in operating expenses at the end of the second quarter. Although slowing to the weakest in three months, the pace of inflation was well above the series average and exceeded the UK trend. In fact, only Yorkshire & Humber and Northern Ireland registered sharper upticks in cost burdens than seen locally.
Meanwhile, output charges rose at another robust pace in June. The rate of selling price inflation matched that seen in May and was the joint-fastest since April 2025. Of the 12 monitored UK areas, only the West Midlands and Northern Ireland posted quicker increases in output prices than in Wales.
Welsh private sector companies recorded a weaker fall in staffing levels during June, as the rate of job shedding eased to the softest in 2026 to-date. Despite cooling, the rate of decline in headcounts was the second-fastest of the 12 monitored UK areas, behind only the East of England.
As has been the case since May 2022, Welsh businesses registered a drop in backlogs of work in June. The pace of depletion quickened notably from May and was the most marked in seven months. Of the 12 monitored UK areas, only Northern Ireland indicated a faster fall in incomplete business that that seen locally.
