State of the Region: Half of firms expecting to recruit in 2011

ALMOST half of businesses in the West Midlands expect to take on new staff during 2011 as the drive to sustain the region’s growth following recession continues.

However, firms have also warned that pricing pressure and the expected impact of widespread public sector cuts remain critical factors on their growth predictions.

These are just two of the findings from the first ever West Midlands ‘State of the Region Survey’ run by TheBusinessDesk.com, in association with law firm DLA Piper.

Completed by hundreds of business people from across the region, the survey gives an indication of how companies see the next 12 months and which factors will impact on their business.

Asked whether they expected to grow staff numbers during the next 12 months, 43% of firms said they did and 41% said they expected to remain the same. Just 16% expect to make redundancies.

Consequently, pay settlements are likely to dominate employee issues for many firms (47%) during 2011.

The vast majority of respondents (59%) said their main priority for 2011 would be to target new UK markets in order to secure growth, while a quarter (25%) said new product development would be their key objective.

The strength of the region is indicated by the fact 58% of firms said the West Midlands remained a good place to do business, with almost half (45%) believing the region offered the best opportunities for their business to secure growth in 2011.

Disappointingly for those organisations touting global markets as the route to success, only 19% of firms said they were looking to exports to drive up trade this year.

Of the challenges ahead, 40% of respondents said the cuts to public spending would be a major factor on growth prospects, while the same percentage highlighted pricing pressure as significant with issues such as the increasing cost of raw materials, energy, fuel and VAT all having a bearing.

Access to finance also remains an issue. The unwillingness of banks to lend was one of the keys issues of last year.

A quarter of respondents (24%) said a lack of funding would remain a challenge for their business in 2011, while two thirds (64%) said they expected bank lending levels to stay the same during the next 12 months.

Sandra Wallace, left, employment law Partner at DLA Piper in Birmingham, said: “Many firms are entering 2011 with an attitude of cautious optimism. As market conditions begin to improve, they no longer have the same level of constant worry over where their next customer or their next order will come from.

“However, that is not to say the next 12 months will be plain sailing. Businesses have yet to witness the impact of the latest spending cuts and the rise in VAT. It may be that towards the end of the year some firms need to go through a period of reassessment to determine whether further changes to their staffing structures are required.

“As the results of the survey indicate, it is also likely we will see an increase in industrial action and employee unrest. As staff see companies riding the storm and returning to a semblance of stability, they will be less willing to accept pay freezes or pay cuts.  So while we have come through the worst of the turmoil in terms of large scale job cuts, 2011 is likely to be a fraught time for employer-employee relations.”

Brian Woolcock, right, head of finance and projects for DLA Piper in Birmingham, said: “The finance team at DLA Piper saw a high level of transactional activity in the final quarter of 2010 and that has continued into the New Year, as we have started January with a series of new instructions.

“However, the concerns that businesses have expressed in the survey are understandable. The recession has altered the financial landscape. The main issue preventing banks lending to businesses or consumers is the fact that they can no longer borrow from each other. All the major players are working towards improving this, but until interbank lending frees up, businesses will continue to find difficulty in accessing finance.”

• Download DLA Piper‘s analysis of the survey by clicking through here.

Tomorrow: The West Midlands Region
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