Directors in the West Midlands are confident about growing their companies over the next 12 months – but are fearful about the futures of the markets they operate in.

Despite tough economic conditions, 73 per cent of firms in the region expect to maintain or increase sales in the next 12 months, according to new research

A total of 59 per cent said they anticipated a rise in operating profits, while 54 per cent expect headcount to be sustained or increased, the Baker Tilly Outlook 2012 survey shows.

However, the attitude towards the outlook for the sectors within which respondents operate was less upbeat with 51 per cent feeling neutral or positive.

Researchers interviewed 46 businesses in the West Midlands, turning over between £1 million and £100 million, and found that directors perceived rising costs as the biggest concern.

A total of 49 per cent said increased direct costs was their major worry, while 41 per cent identified a downturn in overall demand and 38 per cent said public sector cuts were the biggest concern.

The biggest opportunities were noted as taking business from failing competitors, at 43 per cent, lowering costs, at 22 per cent, and technological developments, at 19 per cent.

Simon Hart, office managing partner at Baker Tilly in Birmingham, said while businesses remain upbeat, the situation with the eurozone remains a concern in the region.

He said: “A consistent area of concern continues to be the impact of the escalating sovereign debt crisis in parts of the eurozone. The potential for this to negatively impact the region’s exporters cannot be over-emphasised. As such, events beyond the control of West Midlands’ businesses will no doubt continue to weigh heavily on business leaders’ minds during 2012.”

According to the survey only 21 per cent of companies in the West Midlands will be looking to raise finance in 2012, 50 per cent of which will head to the banks for this to try and secure funding through traditional lending.

While this may be perceived as a safe option, businesses in the West Midlands are however the most likely to consider an IPO as a way of raising finance next year – with 12 per cent considering this as an option – more than double the national average of five per cent.

A total of 25 per cent said they were considering the benefits of private equity and venture capital investment.

Mr Hart added: “The survey results suggest, despite everything, a more positive outlook to 2012 than would have necessarily been expected, seems to exist.

“If nothing else, the global economic downturn has increased business leaders’ awareness of the financial markets, with 70 per cent of respondents agreeing that they are now more aware of financial markets than before the current period of economic instability.”