Welsh firms saw a fresh rise in output during January amid a further upturn in new business, according to the latest Cymru Growth Tracker data from NatWest.
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 at 50.3 at the start of 2026, up from 49.4 in December to signal a renewed rise in output levels at Welsh businesses.
The rate of expansion in new business eased, however, and was only slight overall. Companies were more upbeat in their expectation for 2026 though, as the level of optimism reached the highest since September 2024.
Inflationary pressures remained elevated in January. The rate of increase in charges quickened fractionally, with the pace of cost inflation holding at December’s four-month high.
Jessica Shipman, Chair, NatWest Cymru Board, said:
“Welsh businesses showed growing optimism about future output for the third consecutive month, reaching its highest level since September 2024. Companies remain hopeful that increased investment will drive growth throughout 2026, despite ongoing concerns about how higher charges might affect customer demand.
“January Growth Tracker data also showed that Welsh firms resumed expanding their output, supported by a continued rise in new orders. However, the underlying figures revealed challenges, including slower growth in new sales and an accelerated reduction in staffing levels.
“At the start of the year, cost pressures and hikes in selling prices remained significant. Financial strains compelled firms to increase their prices, with persistent cost increases contributing to a sharper decline in employee numbers.”
Performance in relation to UK
Business activity returned to growth at Welsh firms in January, thereby ending a four-month sequence of contraction. The rate of expansion was only fractional, however, and well below the UK average.
Private sector firms in Wales signalled back-to-back expansions in new sales during January. That said, the rate of growth slowed from that seen in December and was only slight overall. The rate of increase was also weaker than the UK trend.
Nevertheless, Welsh firms were more confident of a rise in output in the coming year in January. The degree of optimism increased for the third month running and was the highest since September 2024. The level of positive sentiment was slightly weaker than the UK trend, however.
January data indicated a further increase in operating expenses at Welsh companies, with input prices rising at the joint-fastest pace since last August (unchanged from December 2025). The rate of increase was historically elevated, with only Northern Ireland registering a sharper uptick of the 12 monitored UK areas.
Welsh firms raised their selling prices for the second month running in January, in a bid to pass on higher costs to customers. The pace of charge inflation was up only slightly from December but was the steepest since May 2025 and broadly in line with the UK average.
Welsh companies recorded a further decline in workforce numbers during January, with the pace of job shedding quickening notably. The decrease in headcounts was the fastest since December 2024 and the steepest of the 12 monitored UK areas.
Despite a rise in new orders, a fresh upturn in output levels helped firms work through their outstanding business at the start of the year. Backlogs fell at a quicker pace than in December, and one that was marked overall. Across the UK, only the East Midlands recorded a faster decline in incomplete business.
