Productivity jumps 24% among high-performing Welsh firms
Productivity has risen by almost a quarter among more than 1,700 of Wales’ highest-performing businesses, although the number of firms achieving <a href="https://bitcomme.com/chinas-elderly-drive-growth-in-online-shopping/” title=”China's elderly drive growth in online shopping”>growth in both jobs and turnover has fallen sharply.
New research by Economic Intelligence Wales (EIW) found average labour productivity among the businesses increased by 24.1%, from £132,729 to £164,746 per employee in 2024-25.
Researchers identified 1,732 Welsh businesses which increased both turnover and employment, with turnover growing at a faster rate – a group the report describes as “Productivity Heroes”.
Together, they increased employment by 5,238, or 16.7%, while turnover rose by £1.87bn to £6.04bn – an increase of 44.8%.
However, the report presents a more mixed picture of the wider performance of Welsh businesses.
The number qualifying as “Productivity Heroes” 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.
They now represent 4.09% of established Welsh SMEs, broadly in line with the UK average of 4.03%.
Researchers said the decline suggested Welsh firms were finding it increasingly difficult to achieve simultaneous growth in turnover and employment.
Almost three-quarters of Welsh businesses recording productivity growth in 2024-25 did so by increasing revenue without increasing their workforce.
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.
Despite that, the smaller group of businesses which did expand their workforces while improving productivity recorded strong growth.
Professor Melanie Jones, Professor of Economics at Cardiff Business School and academic lead for the Wales Productivity Forum, said: “Productivity growth is critical to improving the things people care about including real wage growth, business profitability, and public service delivery.
“Narrowing the existing and persistent 15% productivity gap between Wales and the rest of the UK will require a step change in Wales’ productivity growth.”
The research found the businesses were spread across the economy rather than concentrated in high-tech industries.
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%.
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.
More than half were located in West Wales and the Valleys, while Swansea, Cardiff and Newport had some of the highest concentrations.
One business highlighted is Swansea-based LITELOK, which designs and manufactures high-security locks for bicycles and motorcycles.
Its turnover per full-time employee has increased from around £45,000 in 2017 to approximately £350,000, with annual revenues now approaching £10m.
Professor Mark Hart, deputy director of the Enterprise Research Centre and lead author of the report, said: “Productivity Heroes demonstrate that businesses do not have to choose between creating jobs and improving productivity.
“These firms are successfully achieving both, making them important to Wales’s long-term economic performance. Better understanding what they are doing well can help create more of them.”
The report found successful businesses tended to focus on customer service, investment in staff and leadership, and adopting new technology and working practices.
It recommends moving away from broad business support towards more targeted help with skills, leadership, finance, digital technology and infrastructure.
Cabinet Minister for Enterprise, Connectivity and Energy Adam Price said the findings showed Wales had businesses capable of delivering stronger productivity growth.
He said: “The 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.”
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.
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