Business boom is driven by rising exports

BUSINESSES in the West Midlands are reporting higher turnover and rising employment, with growth set to follow despite the difficult climate.

The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) shows firms in the region are experiencing continued improvement in key financial indicators.

Average turnover during the current quarter is 4% higher than a year ago, while gross profits and sales volumes are 4.5% and 3.7% higher respectively. The rate of growth has also strengthened compared to last quarter.

In the 12 months to Q1 2011 annual turnover, gross profit and sales volume were reported to have expanded by 2.4%, 2.1% and 1.9% respectively.

Export growth also increased this quarter to 6.4%. This is up from 3.7% in the previous quarter and is the strongest rate of growth reported for exports since Q2 2008.

Manufacturers in the region are benefiting from the weak value of sterling compared with pre-recession levels, making UK exports more price-competitive in global markets.

Employment is up 0.2% during the quarter, compared with 12 months ago – the first time there has been a rise since 2008.

There are also signs that businesses are beginning to invest more in their existing staff. This quarter staff development budgets in the West Midlands were on average 0.9% higher than 12 months ago.

However, the input costs are rising, up 2.4% on 12 months ago – and up 0.2% on the previous quarter.

Rising fuel and energy bills are the main contributor, while commodity prices, such as steel, are impacting on manufacturers.

Nigel Hastilow, ICAEW West Midlands Regional Director, said: “Despite the disappointing GDP figures for the last quarter of 2010, BCM provides some positive signs for the West Midlands economy.”

However, he warned businesses continued to face tough economic conditions with the VAT increase and the rise in the cost of living still on a downward trend.

“It is clear business leaders in the region are under no illusion about the challenges ahead,” he added.

Dave Munton, office managing partner at Grant Thornton in Birmingham, added: “The signs are businesses in the region are adapting and becoming more resilient. Overseas activity will be particularly important in 2011, given that domestic demand is likely to be subdued, so I’m encouraged that West Midland businesses are reporting that exports have grown over 2010.”