A third of manufacturers in the Midlands have seen turnover fall in the past three months with almost half expecting a tougher 2009 according to the final quarterly economic survey for 2008 from Birmingham Chamber of Commerce and Industry (BCI).
The survey reveals that business confidence is draining away in both both the manufacturing and service sectors with the latter facing similar falls in revenue during the same period.
The figures came as the latest purchasing managers’ index for manufacturing showed a reading of 34.9 in December - close to the lowest level in the survey’s 17-year history. A figure below 50 means the sector contracted during the period. It is the eighth consecutive month of falls for the sector.
BCI policy adviser Will Rogers said: “In previous surveys, domestic results from the manufacturing and service sectors have been worrying, with both portraying slightly negative results and outlooks.
“However, in recent months manufacturers have become more pessimistic as the turmoil in global markets has increased.
There is no doubt these are the hardest economic conditions for some time and this is reflected in the results from the final quarter of 2008.”
There has been a sharp slowdown in domestic market sales in both sectors with 61 per cent of manufacturers and 38 per cent of services firms surveyed saying there had been a decrease in UK orders.
The survey reveals that business confidence is draining away in both sectors. In manufacturing, 49 per cent expected turnover to decrease, which represents an increase of 28 per cent over the third quarter of the year.
Mr Rogers added: “Because of the marked decline in profitability and cashflow, it is understandable that business confidence is currently at its lowest level of the year and is highlighted by the lack of lending to small businesses.”
Firms within both sectors continue to report worsening cashflow, which has directly affected recruitment and investment intentions.
In manufacturing, 38 per cent of those surveyed revealed that their cashflow had decreased, which represents an increase of 10 per cent compared to the third quarter.
In services, 32 per cent of firms stated that they had seen a reduction in cash flow and are being forced to cut back on recruitment and investment programmes.
On the positive side growth has been sustained across manufacturing export markets with 44 per cent of those surveyed stating their sales overseas had increased, compared to 42 per cent in Quarter 3.
“The fact that the eurozone is the UK’s largest export market is a key component in this encouraging statistic. The rise of the euro against the pound is making imports from Europe increasingly more expensive while our exports are much cheaper. It is becoming clear that Birmingham’s businesses are turning to export markets in significant numbers to sidestep the slowing local economy,” said Mr Rogers.
He added: “Looking ahead, it is crucial for Birmingham businesses that confidence in the UK economy is boosted and demand is stimulated.
“It is important that government continues to assess where it can add value and support UK plc. We support government’s intention to bring forward planned and budgeted-for public spend for infrastructure development and hope we will see significant spend in Birmingham and the West Midlands.”