Businesses in Wales have recorded the highest degree of confidence for seven years, a business activity index has reported.

NatWest Wales’ Business Activity Index, which measures the change in the combined output of Wales’ manufacturing and service sectors each month, showed Welsh firms feeling more upbeat amid hopes of a successful vaccine rollout and the reopening of the hospitality and retail sectors.

Despite business’ confidence, the number of people in the Welsh workforce continued to fall for the twelfth month in a row in February.

New orders received by Welsh private sector firms decreased solidly midway through the first quarter, linked to closures due to lockdown restrictions.

Kevin Morgan, who sits on NatWest Wales’ regional board, said: “Welsh private sector firms registered a fall in output once again in February, as the Covid-19 pandemic and associated restrictions hampered new sales.

"Despite challenging business conditions and ongoing lockdown measures, firms were markedly upbeat regarding the outlook for output over the coming year.

“Although the rate of decline in new business eased, firms were forced to make further job cuts in an effort to rein in spending.

"Price pressures remained robust, as cost burdens soared following supplier price hikes and shortages.

“Firms were able to partially pass-through higher costs to clients. That said, the pace of input price inflation far outpaced that of charges.”

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Last week, Welsh finance minister, Rebecca Evans, announced an extension to Wales’ business rates holiday.

The £380 million package provides Welsh retail, leisure and hospitality businesses with rateable values up to £500,000 with a year-long business rates holiday.

Welcoming the news, Ben Francis, Wales Policy Chair for the Federation of Small Businesses, said: “Businesses in Wales will be delighted that Welsh Government has extended the business rates holiday for retail, hospitality and leisure firms for another year.

“Business rates represent a significant financial obligation for many businesses and having the rates holiday in place for longer will remove a huge amount of pressure, provide an element of financial certainty and will be a big step towards recovery for thousands of businesses."

The Government is expected to announce whether non-essential retail will reopen in its Covid review on Friday, March 12.