Welsh businesses cut jobs faster than any other UK nation or region in August. Weak demand kept pressure on hiring plans across the country.
The latest NatWest Cymru Growth Tracker shows a mixed picture. Business activity grew for the second month in a row. But companies kept cutting staff as new orders fell again.
The Wales Business Activity Index came in at 50.4 in August, down slightly from 50.5 in July. Any reading above 50 signals growth. Still, that headline number hides some real problems underneath.
New orders dropped for the seventh straight month. At the same time, Welsh businesses cut jobs faster than any of the 12 UK nations and regions the survey tracks.
Employment in Wales has fallen every month since September 2024.
These numbers suggest that firms are still finishing existing work. But they aren’t getting enough new orders to justify hiring more people.
Welsh Firms Are Burning Through Their Backlog
One warning sign stands out clearly: outstanding work is shrinking fast.
Welsh companies cleared their backlogs faster than any other UK region in August. That means businesses are working through jobs already on their books, even as new demand stays weak.
This matters because backlogs only last so long. Existing contracts and orders can keep a business running for a while. But if new work doesn’t pick up, companies could run out of jobs to do in the coming months.
The contrast with the rest of the UK makes this clearer. While new orders in Wales kept falling, the rest of the UK saw a small improvement in new business.
Welsh employers now face a tough balancing act. They need enough staff to handle future growth, but they also need to control costs while demand stays uncertain.
Rising Costs Add More Pressure
Higher operating costs are making things harder too.
Input costs rose slightly in August. Welsh firms responded by raising their prices a bit faster, hoping to protect their profit margins.
Business confidence has also dropped. Expectations for the year ahead hit their lowest point since October 2025. That leaves Wales with the second-lowest confidence score among all UK areas the survey covers.
For small and medium businesses, this makes cash flow and cost control more important than ever.
Ignoring a shrinking order book can cause problems down the road. A business might keep spending at its current pace without noticing its pipeline is drying up. That leaves less room to cover payroll, tax bills, and other fixed costs if sales slowdown further, so keeping a close eye on cash flow forecasting becomes essential.
What Should Employers Do Now?
One survey shouldn’t push businesses into panic cuts. But it should prompt a closer look at the numbers before making new hiring or spending decisions.
Employers should compare their expected sales against payroll costs, current backlogs, and short-term cash needs. They should also check whether rising costs are squeezing margins faster than expected.
Eligible businesses should also check if they qualify for Employment Allowance. For the 2026/27 tax year, qualifying employers can cut their employer Class 1 National Insurance bill by up to £10,500.
Any company thinking about restructuring should fully understand its payroll, cash flow, and financial obligations before making major workforce decisions.
Lanop Business & Tax Advisors can help you review cash flow, payroll costs, margins, and available employer reliefs before pressure builds up further, all as part of proactive tax planning. With demand still weak across Wales, early financial planning gives business owners a clearer picture of what they can afford, and what steps to take next. Contact Lanop today to review your payroll and cash flow position.
