Midland stocks are the country’s star performers, helped by a strong industrial sector, according to new figures.

But pay deals at manufacturing firms have fallen for the third month in a row to their lowest level in more than 18 months, another report has found.

A high concentration of listed industrial companies has helped the Midlands’ regional stock index outperform the broader UK market so far this year, according to Credit Suisse’s UK Regional Wealth Report.

The research analyses the UK’s regional economies through a series of stock market indices to gauge the impact of the credit crisis on the UK’s regions.

Head of UK Research for Credit Suisse’s private banking business Michael O’Sullivan said: “Our research shows the impact the credit crunch is having on regional listed companies across the UK, with small caps suffering, but industrial stocks performing well.

“The Midlands has a dynamic spread of local businesses, in particular, the growth in entrepreneurs and flourishing family-owned businesses is very encouraging,” he said.

Midland stock indices are heavily weighted towards industrial firms, who make up 38 per cent in the West Midlands in contrast with 21 per cent for the UK as a whole.

The research found industrial firms in the Midlands have outperformed both the broad UK index and industrial stocks from other regions.

But Midlands-based listed businesses dependent on consumer spending have not fared as well.

Credit Suisse pointed to the “disappointing” performance of 37 consumer-orientated stocks in the Midlands, due to the increased pressure as a result of weakening UK consumer spending.

Mr O’Sullivan added: “Looking forward, we believe the UK economy will cool down, rather than crash. “We expect a transfer of power from the housing sector to the manufacturing sector.

“This should help regional economies, such as those in the Midlands, where there is a particularly high concentration of manufacturing activity. These companies are also likely to be helped by the sterling weakness throughout this year,” he said. 

The Credit Suisse report is based on data from 192 companies in the Midlands listed either on the London Stock exchange or Aim.

Meanwhile, a report from the Engineering Employers Federation (EEF) found that manufacturers are showing restraint in pay deals in the face of tougher economic conditions.

Manufacturing pay settlements fell for the third consecutive month to their lowest level for more than 18 months, the research found.

EEF figures for the three months to the end of May 2008 showed the average level of pay settlements fell to three per cent, slightly lower than the previous three month’s figure of 3.1 per cent.

The study, which took in 260 settlements covering almost 50,000 workers, also showed that the number of companies reporting pay freezes rose to just over seven per cent of all settlements, the highest figure reported since March 2006.

EEF deputy director of employment policy David Yeandle said: “This gradual decline in pay settlements coupled with the quite sharp increase in pay freezes and deferments clearly indicates the tougher economic climate now facing manufacturers.

“Despite the increased cost of living, in such difficult conditions it would appear that this is not being translated into pay pressures in this sector,” he said.