Controlling inflation is crucial say businesses

BUSINESSES in the West Midlands believe keeping inflation in check is the key to improved fortunes this year.

A new survey from the West Midlands Chamber of Commerce (WMCC) reveals inflation is the main concern of both service businesses and manufacturers with 24 per cent of services and 23 per cent of manufacturers citing it as the biggest external factor putting pressure on their business. 

The survey – covering the last quarter of 2011- also reveals a service sector growing at a subdued rate and the manufacturing sector showing signs of slowing.

The number of firms in the service sector reporting an increase in their domestic and export sales is up by only one per cent at 37 per cent compared with the previous quarter. Meanwhile, there was a drop in the number of manufacturing companies reporting increased home sales from 45 per cent in the previous quarter to 41 per cent. And the increase in advance orders fell to 37 per cent from 39 per cent in Q3.

Mike Ashton, spokesman for the WMCC, said: “It’s important to appreciate that this is not a decline, simply a slowdown in growth because tough economic conditions have dampened demand. 

“Inflation has been rampant for many months and this has had a significant impact on demand and confidence. Many businesses are holding off on investment and hiring in the hope that the global economy can bounce back from the many shocks that it has suffered.

“We expect to see inflation begin to fall back in the coming months to the 2% target set by the government for the Bank of England and many businesses will be counting on it. Inflation is currently running at 4.8 per cent and, thankfully, has fallen for the past two months.”