West Midlands business confident of improving prospects

MORE than half of businesses in the West Midlands are confident of improving their fortunes in 2011, a new survey by the West Midlands Chambers of Commerce has claimed.

The WMCC’s last survey of 2010 reveals that confidence remains high in the region despite the economic downturn.

Mike Ashton, WMCC board member and chief executive of Hereford and Worcester Chamber of Commerce, said: “This shows a real fighting spirit among the region’s business community. The fact that over half feel that both sales and profitability will increase through the New Year shows their determination to tough out the downturn.”

Figures show that any recovery may be led by the service sector although manufacturing, the traditional bedrock of the region’s economy, has high hopes of a reversal in fortune.

The results are in line with the Birmingham Chamber’s own quarterly survey which showed manufacturing trailing the service sector during the last three months of last year.

According to the WMCC survey, the home market recorded its highest figures for 12 months with 41% of firms saying sales improved during Q4 while 37% had fuller order books than at any time in a year.

While 55% said export sales had improved, advance orders were poor, with only 33% showing an increase. However, the figure was the highest for the year.

“The increased figures are encouraging but we must remember that we are starting from a very low point,” said Mr Ashton.

“Figures have been extremely low for two years but we are right to hope for improvements in 2011 provided a double-dip recession can be avoided.”

Sales and order figures for manufacturing remained more static. Improved home sales dipped to 39% – the lowest figure for two quarters – but 41% improved advance orders, only slightly down on Q3.

Exports for manufacturers remained steady with 36% reporting an increase in the final quarter, while 33% said orders were up.

On an optimistic note, firms in both sectors said turnover and profitability would improve this year. The service sector was more confident with 58% expecting turnover to increase and 59% forecasting improved profitability.

Confidence among manufacturers remained fairly static although more than half (58%) said they expected to increase turnover, while 51% forecast a boost in profitability.

Investment plans in both sectors were near their lowest for 12 months. The only marked increase was among manufacturers with 29% looking at buying new equipment compared with 14% a year ago.

By far the biggest concern for manufacturers over the last three months has been the cost of raw materials, with 53% saying costs were imposing the biggest pressures on them to increase prices. Just 12% were concerned about finance costs, while 11% of firms said pay settlements had proved a burden.

On the jobs front, recruitment among manufacturers remained low with just 30% increasing their workforce and only 18% planning to take on more staff in 2011. Only 20% of firms in the service sector increased their workforce in 2010, although the same number forecast an increase during the current year.