Businesses in the West Midlands have refused to panic in the face of the Northern Rock credit crisis although they are predicting that economic growth will be slower next year.

The CBI's West Midlands Council said yesterday that its members remained confident about the overall strength of the economy and were prepared to ride out the storm.

The picture mirrored that of the CBI's national body, which yesterday reacted to the current situation by cutting its forecast for UK economic growth.

The industry body said it now expects GDP growth of 2.2 per cent next year, a reduction of 0.2 per cent from its June forecast.

However, the CBI added that economic growth in the current year was set to rise by 0.1 per cent to three per cent after a stronger than expected third quarter.

Additionally, the CBI brought forward its expectations for a quarter-point cut in interest rates to the second quarter of next year.

West Midland regional chairman Grey Denham said the pattern was reflected in the region.

"The regional indicators are still confident," he said yesterday, although he pointed out that the latest survey was conducted several weeks ago, prior to the Northern Rock crisis.

"However, the picture we are seeing is that our members are confident on volumes, employment levels - which they don't see falling - and their ability to invest in capital expenditure," he added.

Looking forward, he said, demand was also positive, although not as high as it was in the previous quarter.

"The levels of nervousness as a result of what's happened with Northern Rock might not surface until next quarter, however, at the moment no one is panicking.

"There's also no evidence yet of the banks withholding credit," he said.

He agreed that the Government's action had helped to take the steam out of the situation and he said the CBI was expecting to see a redistribution of investment as a result of Northern Rock as savers looked at alternatives homes for their money.

"If there is a credit crunch then mortgages and lending may become more conservative but I think at the moment, people are waiting to see what will happen," he said.

Elsewhere, he said members were expecting a slowing down in the number of mergers and acquisitions, partly as a result of the shortage of cash. Nationally, CBI director general Richard Lambert said the UK economy was in good shape to ride out the current financial storm.

"British businesses have been growing strongly and the fundamentals of the economy are sound," he said.

He added the current turmoil had put a small number of businesses reliant on short-term credit under pressure.

Elsewhere, it said it expected housing prices to stagnate, although not at the levels seen in the 1990s, while consumer spending forecasts were also lowered, down by 0.1 per cent to 2.7 per cent in the current year, easing to two per cent in 2008 as the turbulence feeds through to higher rates for consumers.