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Photo Getty Images is Licensed under the Unsplash+ License<\/p>\n Photo Getty Images is Licensed under the Unsplash+ License<\/p>\n
Mark Mansfield<\/p>\n
Productivity has risen by almost a quarter among more than 1,700 of Wales\u2019 highest-performing businesses, although the number of firms achieving growth in both jobs and turnover has fallen sharply.<\/p>\n
New research by Economic Intelligence Wales (EIW) found average labour productivity among the businesses increased by 24.1%, from \u00a3132,729 to \u00a3164,746 per employee in 2024-25.<\/p>\n
Researchers identified 1,732 Welsh businesses which increased both turnover and employment, with turnover growing at a faster rate \u2013 a group the report describes as \u201cProductivity Heroes\u201d.<\/p>\n
Together, they increased employment by 5,238, or 16.7%, while turnover rose by \u00a31.87bn to \u00a36.04bn \u2013 an increase of 44.8%.<\/p>\n
However, the report presents a more mixed picture of the wider performance of Welsh businesses.<\/p>\n
The number qualifying as \u201cProductivity Heroes\u201d fell by 23% from 2,224 in 2023-24 to 1,732 in 2024-25, and is well below the exceptional peak of 2,637 recorded in 2022-23.<\/p>\n
They now represent 4.09% of established Welsh SMEs, broadly in line with the UK average of 4.03%.<\/p>\n
Researchers said the decline suggested Welsh firms were finding it increasingly difficult to achieve simultaneous growth in turnover and employment.<\/p>\n
Almost three-quarters of Welsh businesses recording productivity growth in 2024-25 did so by increasing revenue without increasing their workforce.<\/p>\n
The report says this could point to a gradual shift away from productivity growth accompanied by job creation towards growth involving little employment expansion or, in some cases, workforce reductions.<\/p>\n
Despite that, the smaller group of businesses which did expand their workforces while improving productivity recorded strong growth.<\/p>\n
Professor Melanie Jones, Professor of Economics at Cardiff Business School and academic lead for the Wales Productivity Forum, said: \u201cProductivity growth is critical to improving the things people care about including real wage growth, business profitability, and public service delivery.<\/p>\n
\u201cNarrowing the existing and persistent 15% productivity gap between Wales and the rest of the UK will require a step change in Wales\u2019 productivity growth.\u201d<\/p>\n
The research found the businesses were spread across the economy rather than concentrated in high-tech industries.<\/p>\n
Business services accounted for a third of the 1,732 firms, followed by wholesale and retail at 17%, construction at almost 13%, hospitality at nearly 12% and manufacturing at around 8%.<\/p>\n
Micro-businesses<\/p>\n
Micro-businesses employing between one and nine people made up 58% of the group, while 57% of the firms were between three and nine years old.<\/p>\n
More than half were located in West Wales and the Valleys, while Swansea, Cardiff and Newport had some of the highest concentrations.<\/p>\n
One business highlighted is Swansea-based LITELOK, which designs and manufactures high-security locks for bicycles and motorcycles.<\/p>\n
Its turnover per full-time employee has increased from around \u00a345,000 in 2017 to approximately \u00a3350,000, with annual revenues now approaching \u00a310m.<\/p>\n
Professor Mark Hart, deputy director of the Enterprise Research Centre and lead author of the report, said: \u201cProductivity Heroes demonstrate that businesses do not have to choose between creating jobs and improving productivity.<\/p>\n
\u201cThese firms are successfully achieving both, making them important to Wales\u2019s long-term economic performance. Better understanding what they are doing well can help create more of them.\u201d<\/p>\n
Customer service<\/p>\n
The report found successful businesses tended to focus on customer service, investment in staff and leadership, and adopting new technology and working practices.<\/p>\n
It recommends moving away from broad business support towards more targeted help with skills, leadership, finance, digital technology and infrastructure.<\/p>\n
Cabinet Minister for Enterprise, Connectivity and Energy Adam Price said the findings showed Wales had businesses capable of delivering stronger productivity growth.<\/p>\n
He said: \u201cThe message from these businesses is clear: with the right support for skills, leadership and innovation, more Welsh firms can grow, create jobs and become more productive.\u201d<\/p>\n
The report, Productivity Heroes in Wales: who they are and why they matter, was produced by EIW with research led by the Enterprise Research Centre at Warwick Business School.<\/p>\n
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