Peugeot's decision to close Ryton could derail the renewed confidence among businesses in the Midlands, it has been claimed.

The region has swung from being the least confident part of the country to witness the greatest growth in positivity among companies, according to the Business Confidence Monitor.

The Institute of Chartered Accountants of England and Wales/Orange UK Regional guide, which is published today, said business confidence surged by 16.1 points since last quarter when the Midlands was the least confident in the UK.

A revival in confidence among manufacturers and engineering sector has driven the overall upturn, the study said, with 32 per cent being slightly more confident, three per cent more than the UK average.

Companies which felt as confident accounted for 36 per cent of respondents (UK aver-age 35 per cent) and only three per cent were much less confidence (average was six per cent).

However the figures were collected before the recent announcement that the Peugeot plant at Ryton near Coventry is to close with the loss of 2,300 jobs.

Following in the wake of the Longbridge closure it is estimated that the current buoy-ancy in confidence may change by the third quarter survey since the profile of manufacturing is high within the West Midlands.

The BCM also pointed to some of the longer term risks ahead, including uncertain consumers, higher household bills and rising unemployment.

These factors along with a stabilising housing market, cautious investment and inflationary pressures from oil prices at record highs, could cause the economy to falter later in the year and into 2007, it said.

John Kelly, president of the Birmingham and West Midlands ICAEW, said: "There are significant raw material price increases such as copper and iron ore coupled with ever increasing costs for fuel and power.

"Manufacturers are struggling to pass on these costs to the global market but they need to stand firm and negotiate the increases to maintain their profits.

"We must ensure the region is at the forefront of investment and innovation for product development as this could affect our future prosperity in the long term as the manufacturing base shrinks into the regions that invest the most."

But despite the relatively upbeat message, job losses are still hurting the West Midlands, a separate study claimed.

Regional Purchasing Managers Index figures by the Royal Bank of Scotland, showed jobs continued to be lost despite a pick up in activity.

"Job-shedding was again recorded in the region, driven by redundancy programmes and efforts to improve production efficiency in the manufacturing sector," said RBS economist Julien Seetharamdoo.

"Business activity continued to grow at a healthy pace in May, though manufacturing employment is still under pressure.

"Firms in the West Midlands signalled further robust expansions of output and new orders. Higher levels of output were broad-based across the private sector economy.

"In contrast, growth of incoming new business was largely confined to the service sector.

"Input cost pressures worsened, as input price inflation accelerated to its sharpest pace since December 2004," he added.