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Welsh output nears stabilisation as contraction in new business slows

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THE HEADLINE NatWest Wales PMI Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – rose from 48.0 in December to 49.9 in January, to signal broadly unchanged output levels at Welsh businesses at the start of 2024.

The broad stabilisation in activity followed four successive monthly declines. Nonetheless, of the 12 monitored UK areas, only Wales and the North East posted a sub-50.0 reading. Where a decrease in activity was noted, Welsh companies linked this to further subdued demand conditions and a downturn in new orders.

Welsh private sector firms recorded an eighth successive monthly decline in new orders during January. Anecdotal evidence suggested the fall was due to subdued client demand and greater competition. That said, the rate of decline eased for the third month running to the slowest since last September.

The marginal drop in new orders contrasted with the UK trend which signalled a modest expansion.

Firms in Wales indicated strongly upbeat expectations regarding the outlook for output over the coming year in January. Greater optimism was attributed to planned investment in capacity expansion, new product launches and hopes of a pick-up in customer demand.

Although higher than the series average, the level of positive sentiment dipped from that seen in December and was lower than the UK trend.

Workforce numbers at Welsh firms dropped for the sixth month running in January, with companies cutting staffing levels at a steep pace. Although the slowest for three months, the rate of job shedding was sharper than the series average and contrasted with the UK trend. Moreover, the pace of decline was the quickest of the 12 monitored UK areas.

Lower employment was linked to the non-replacement of voluntary leavers and efforts to cut costs.

Welsh firms recorded a further drop in backlogs of work during January, thereby extending the current sequence of decline seen since May 2022. Panellists often noted that subdued demand conditions led to the sustained decrease in incomplete business.

Although the pace of contraction slowed to the weakest since April 2023, it was sharper than the UK average.

January data signalled a continued increase in input prices faced by Welsh firms. Manufacturers and service providers alike recorded an uptick in cost burdens, as the overall rate of inflation quickened to the fastest since May 2023. Higher input prices were linked to greater wage bills, alongside increased supplier and transportation costs.

Despite accelerating, the pace of increase was slower than both the UK and historic series averages.

Welsh businesses registered a further solid rise in selling prices at the start of the year. The pace of inflation was little changed from that seen in December and slightly quicker than the long-run series average. The uptick in output prices reportedly stemmed from the pass-through of greater costs to customers.

The rate of increase was among the slowest of the 12 monitored UK areas, however, and faster than only Northern Ireland, the North West and Yorkshire & Humber.

Jessica Shipman, Chair, NatWest Cymru Regional Board, commented: “The start of 2024 signalled more positive trends emerging from the Welsh private sector, as activity was broadly stable on the month and the contraction in new business slowed to only a marginal rate. Firms also remained strongly upbeat in their expectations for the year ahead, and future expansion in output.

“Nonetheless, businesses cut workforce numbers steeply as pressure on capacity dwindled further. Job shedding in Wales was the fastest of the 12 monitored UK areas, with firms looking to rein in costs and have a tighter control on spending.

“Although cost burdens rose at a marked and accelerated pace, the rate of inflation was below both the historic series and UK averages. Moreover, in a bid to secure new sales, companies raised selling prices at only a solid rate that was among the weakest across the UK and much slower than that seen over 2023 as a whole.”

Business

Another ‘first’ for west Wales brewers Evan Evans

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AWARD-WINNING brewers Evan-Evans will launch the first Welsh zero alcohol cider at the Royal Welsh Show next week.

Blended and bottled in Llandeilo, the zero alcohol drink will be part of the hugely-popular RedHog cider brand.

“We pride ourselves in being an innovative brewery here in Llandeilo and we are delighted to be showcasing the new zero alcohol RedHog at the Royal Welsh in Llanelwedd, Builth Wells,” a company spokesman said today.

“Our RedHog wild cider is already a great hit with consumers. It is a subtle blend of delicious ciders from the Welsh borders. 

“The Buckley family has been brewing since 1767 and there are seven generations of brewing passion and expertise in the heritage of the Evan Evans brewery.

“Down the years, we have earned a reputation for quality beers and ciders. We also boldly go where other brewers fear to tread in developing new products. We get great feedback from our customers and they are hugely influential in telling us what drinks they like.”

The Evan Evans spokesman added: “Our new zero alcohol cider will help appeal to younger drinkers and those who love the taste of a great and refreshing cider.

“We are launching two new zero alcohol flavours – RedHog Medium Dry Zero, and RedHog Summer Fruit Zero.

“There is huge demand for zero alcohol products and we at Evan Evans have spent the last two years perfecting the Reverse Osmosis (RO) process for the dealcoholisation of cider and beers.

“We are the only Welsh company currently using the process. RO gives us the opportunity to retain and build flavours while stripping out the alcohol.

“We have spent a lot of time developing taste profiles, and getting the products right. Too often, the complaint is that zero products lack taste. These ciders are excellent, exciting, and provide a very real alternatives for designated drivers and customers who do not wish to drink alcohol.”

The RedHog zero alcohol drinks will be available from early next week from the brewery Rhosmaen Street, Llandeilo, or Castell Howell Foods in Carmarthen.

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Steel industry faces turning point amid planned blast furnace closures

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THE CLOSURE of the UK’s last remaining blast furnaces has sparked significant debate and concern. As Britain plans to shut down the last blast furnace at Port Talbot and the two still in operation at British Steel in Scunthorpe, many are questioning the implications for the country that invented modern steelmaking.

The transition from traditional blast furnaces, which produce “virgin steel” by melting iron ore with coking coal, to electric arc furnaces (EAFs), which recycle scrap steel using electrical currents, is at the heart of this debate. Virgin steel production is notoriously carbon-intensive, while EAFs offer a more environmentally friendly alternative, aligning with Britain’s net-zero laws.

Critics argue that the UK will become overly dependent on steel imports, which could be problematic in times of international conflict. However, this argument fails to acknowledge that the UK’s virgin steel production is already heavily reliant on imported materials such as iron ore from Sweden, Brazil, and Australia, and coal from various parts of Europe. By shifting to EAFs, the UK would instead use domestic scrap steel, reducing reliance on foreign materials.

It was once true that EAFs could not produce advanced steel grades, but technological advancements have changed this. For instance, the finest grades of steel for aircraft landing gear and nuclear submarines are already produced in UK EAFs. While some argue that certain steel grades still require virgin steel, others in the industry believe EAFs can meet all steel production needs with the right materials.

Tata Steel UK’s plan to replace Port Talbot’s blast furnaces with EAFs could significantly reduce carbon emissions. While there are concerns about the economic and employment implications of this transition, it also presents an opportunity to recycle the 7-8 million tonnes of scrap steel the UK currently exports annually.

Despite these benefits, there is unease about the rapid closure of all UK blast furnaces. This drastic shift may lead to unintended consequences, especially given the high energy costs in the UK. If electric arc steel production proves more expensive, it could drive up the cost of steel, making imports from countries with less environmentally friendly practices more attractive.

Additionally, the UK’s steel strategy appears conservative compared to pioneering efforts in countries like Sweden, where hydrogen DRI plants are being developed, and the US, where electrolysis is being explored for steel production. The UK, once a leader in industrial innovation, risks lagging behind by committing solely to EAFs.

While the closure of the UK’s blast furnaces represents a significant step towards reducing carbon emissions, it also underscores a broader issue: the need for a more ambitious and innovative approach to steelmaking. The country that once spearheaded the Industrial Revolution must now rise to the challenge of leading the next wave of industrial innovation.

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Calls for extra charges for holiday let owners to be relaxed

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A CALL for an update on Pembrokeshire County Council’s position on a potential relaxation of the ‘182-day’ rule, allowing self-catering accommodation to avoid paying a council tax premium is to be heard later this week.

Last year, the rules on holiday lets in Wales changed; Welsh Government criteria saying holiday lets must be filled for 182 days a year – up from a previous 70 – in order to qualify for business rates rather than pay second homes council tax.

In Pembrokeshire, second homes, and self-catering businesses not meeting the criteria, are now paying a 200 per cent council tax premium in the county, effectively a treble rate of council tax.

At the July 18 meeting of full council, a question submitted by leader of the Independent Group, Cllr Huw Murphy will be heard, a follow-up from a previously submitted notice of motion where he had called for a relaxation in the ‘182-day’ rules in the county.

Cllr Murphy will ask: “At full council on October 12, 2023, I submitted a Notice of Motion (NoM) requesting that PCC use its discretionary relief policy regarding the current 182-day occupancy rule for self-catering accommodation and reduce the eligibility criteria to 140 days in support of the tourism industry.

“This NoM was debated by Cabinet on Dec 4, 2023, where it was not adopted but would be reviewed in 12 months following the impact of legislative change where evidence to support potential change to the 182-day occupancy rule will have been gathered.

“Furthermore, Cabinet stated they would write to Welsh Government to highlight concern over the 182-day occupancy rule and to be provided with information on how the current regulations are working both in Pembrokeshire and the rest of Wales, to support a review in 12 months’ time.

“Nine months have elapsed since this NoM was presented to Council in Oct 2023 and seven months since Cabinet debated it with two recommendations and this question is submitted in two parts.

“Can Council be provided with an update of what data has been obtained since Dec 2023 to examine the impact of the 182-day occupancy rule for self-catering properties in advance of a review to be completed by December 2024 prior to any decision over what level of second home council tax to be levied for 2024/25 as it may be necessary to consider a reduction to support an industry under pressure?

“Have PCC received a reply from WG with regards to the concerns raised with regards to the 182-day rule and its impact on the Pembrokeshire tourism industry?”

Cllr Murphy’s questions will be heard at the full council meeting.

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