A lack of confidence is creeping into both the manufacturing and service sectors in the West Midlands, according to the second quarterly survey of the year from Birmingham Chamber of Commerce and Industry.
Manufacturers in the West Midlands report a stark decline in sales in the home market, but growth in exports.
At the same time, 48 per cent of manufacturers say they are under pressure to increase prices because of rising raw material costs and the huge fuel demands across the Chinese and Indian economies and recent disruptions in production in Nigeria, Algeria, Iraq and Pakistan.
And business confidence is at its lowest since the same period three years ago.
Katie Teasdale, policy adviser at the chamber, said: “Given the slowing economic growth, the increased likelihood of price rises is the most worrying development this quarter. Employers across all sectors report growing concerns regarding upward inflation pressures.”
She said that 52 per cent of companies expected to increase prices over the next three months to restore margins.
“There is a degree of tension between manufacturers as to whether inflation or slowing growth is the greater threat facing them. Those relying on internal markets, such as property and construction, view the threat of slowing growth as the most significant and are urging cuts in interest rates – 11 per cent – while others are more circumspect about the long-term implications of inflation.”
Only 36 per cent of firms are working at full capacity and this comparatively low figure reflects falling domestic demand and is born out in revised recruitment and investment intentions. Those firms expecting to increase investment in training has fallen and is now at its lowest since the fourth quarter of 2001. The majority of firms – 71 per cent – anticipate that their workforce will remain constant over the coming quarter, while only 30 per cent of firms are looking to recruit compared with 52 per cent last quarter. Of those looking to recruit, 50 per cent report recruitment difficulties in skilled manual/technical and professional/managerial categories.