The booming export market caused by the weak pound was not enough to keep spirits up at struggling manufacturers, the West Midlands Chambers of Commerce has said.
Echoing the earlier report of the Birmingham chamber, the WMCC’s quarterly economy survey found business confidence across the region had plummeted in the face of the worsening economic downturn.
The report for the past three months of 2008 claimed increasing numbers of businesses were expecting their companies to drop in both sales and profits over the next 12 months.
It said fewer companies in both the service and manufacturing sectors had plans to invest in their own business, with equipment and training budgets being among the first to be cut when times got tough.
Simon Topman, chairman of the WMCC, said: “These figures show what a nervous state business is in.
“The survey was conducted across the whole of the West Midlands and paints a gloomy picture for 2009. Unfortunately, training and investment in equipment are the first things to take a knock.
“These are the very areas which can have a damaging long-term effect. We call on the government to launch incentives for businesses to continue their training programmes and investment in equipment, particularly research and development.”
The research covered businesses in the areas of seven chambers in the West Midlands – Birmingham and Solihull; Black Country; Coventry and Warwickshire; Herefordshire and Worcestershire; North Staffordshire; Shropshire; and Southern Staffordshire.
High numbers of businesses across a variety of sectors expected to cut their workforces soon. Nearly one in three manufacturing firms expected to lose staff over the next three months and 23 per cent of service firms thought they were going to lose people.
Exchange rates and competition had become much more of a hot topic for manufacturers than three months ago, while service sector firms were hit by a wider variety of factors, including competition, inflation and interest, business and exchange rates.
This nervousness was mainly caused by the problems in the domestic market. Only 13 per cent of manufacturers reported increased orders in the UK, compared with 41 per cent a year ago. In the service sector, 17 per cent reported increased orders compared with 36 per cent a year ago.
There was some hope over the future of export markets, as the plummeting pound made the UK a better option for international customers, but even there a mere 28 per cent of firms had increased orders in the past three months compared with 40 per cent in the last quarter of 2008.
The drop in sales and the lack of ready credit meant cash flow was a problem for many firms. Nearly half of manufacturers said the situation had worsened over the past three months and 42 per cent in the service sector said they had experienced the same problem.
Mr Topman added: “The fact that some companies are increasing their export activities is encouraging. It demonstrates that with the right advice, businesses can venture abroad to fill the gaps being left by the home market.
“The weakening pound makes British goods cheaper abroad and companies are encouraged to investigate new markets and products.”