A record number of manufacturers in the West Midlands have turned to overseas markets to sustain growth, according to the third quarterly economic survey by Birmingham Chamber of Commerce and Industry.
Eighty-two per cent of those manufacturers surveyed said they had exported during the three months to October although 53 per cent said there had been a decrease in domestic market sales and 46 per cent said their had been a reduction in UK orders.
Seventy-five per cent said that export sales have remained constant or increased and 71 per cent of manufacturers note that forward export sales have remained constant or increased.
The Chamber’s senior policy advisor, Katie Teasdale, said: “Perhaps surprisingly, manufacturers are more confident that turnover will rise – an increase of 15 per cent over the previous quarter – but there are still lower expectations as far as profitability is concerned.
“This time last year 73 per cent were optimistic about increasing profits over the next 12 months but that has fallen to 37 per cent in this quarter – a clear sign that we are now operating in profoundly different circumstances.”
“The decrease in domestic sales and orders is in keeping with national trends and is a direct result of the fact that companies are working in the worst operating conditions for 20 years with global market turmoil, rising inflation and general instability,” she added.
This is reflected by the impact of the severe slowdown in construction further down the supply chain and consequently, only 31per cent of firms are now working at full capacity.
However, while external demand has fallen slightly, the Chamber said it was still able to talk of growth, albeit slow, across manufacturing export markets. This is very pleasing given the economy’s predicament,” she said.
The survey also reveals that the percentage of manufacturers expecting to increase their workforces over the next three months has dropped from the previous quarter. Only 38 per cent now think they will need more workers, compared with 43 per cent in the last quarter.
The situation is just as dire in the service sector, where domestic sales have slumped with only 33 per cent of companies experiencing an increase over the last three months compared with 42 per cent in the second quarter.
“In particular, we are seeing a sharp fall in conveyancing and property-related services in the legal sector as the housing market deteriorates,” added Ms Teasdale.
“Firms are being forced to diversify, not always comfortably, into other markets.
“Similarly, corporate demand for recruitment, advertising and marketing is falling with discretionary spend weakening and affecting hospitality sectors.”
However, she said that last week’s Conservative Party Conference had provided a fillip for the city, with its hotels, restaurants and bars all busier than usual.
In keeping with the manufacturing sector, growth across export markets has also increased.
Forty-four per cent of service sector firms increased export sales over the last quarter which contrasts with 41 per cent in the last quarter. With 50 per cent of firms operating at full capacity more are looking to increase rather than decrease their investment plans to tackle capacity pressures despite the weak economic outlook.
“On balance, the service sector expects to increase rather than decrease its workforce over the next three months with 50 per cent of respondents attempting to recruit at the moment.
“But 47 per cent of those recruiting are still experiencing recruitment difficulties – pointing to the limited availability of higher level skills in niche areas such as accountancy and fewer migrant workers,” said Ms Teasdale.