The MG Rover effect is depressing prospects for the West Midlands virtually across the board, according to a survey by the Institute of Chartered Accountants in England & Wales.
Now it is urging the Bank of England to cut interest rates sooner rather than later in order to stimulate the retail and housing sectors.
The interest-setting Monetary Policy Committee makes its latest announcement today - most pundits expect it to leave rates at 4.75 per cent.
Firms forecast the stabilisation of inflation over the coming year at two per cent or below - the Bank's target - notwithstanding the everpresent threat of surges in the oil market.
But, with increased competition from Eastern Europe and Asia and stable growth in salaries, the economy as a whole continues to slow down, it warns.
The ICAEW's Business Confidence Index is at its lowest level since the survey began two years ago - 1.7 per cent down from 6.2 per cent three months ago.
Across the UK, the communications, IT and business services sectors project the highest confidence levels. However significant falls in optimism in the retail and finance sectors has pushed down the overall level.
Smaller businesses are also claimed to be enjoying a boom in confidence - seen as more entrepreneurial and working in niche markets, hence attractive to banks and investors. Projected growth in the West Midlands is notably lower than that of the UK as a whole. Confidence is down as the region faces structural adjustment, following the collapse of MG Rover and the uncertainty surrounding jobs at Marconi.
Reginald Wynniatt-Husey, president of the Birmingham and West Midlands Society of Chartered Accountants, said: "Business confidence in the West Midlands is particular fragile at present.
"We have been very proactive in setting up support for suppliers and distributors to MG Rover through a new half a million pound loan fund instituted by the ICAEW. It is very important that businesses are aware of the help that is available and that we, as chartered accountants, are playing a vital role, offering advice especially after the events of recent weeks.
"With communications, IT and small businesses leading the way in the West Midlands, this should give the incentives necessary to increase confidence in other sectors. The West Midlands business sector is going through a rough ride at present but we have the ability to diversify which should ensure our eventual survival."
On average, West Midlands businesses record an ICAEW Confidence Index score of -5.4 - the index would stand at +100 if all finance professionals were 'much more confident' about the future and -100 if they were all 'much less confident'.
The score is 7.1 points less than the national average of +1.7.
Growth remains lower than in the UK as a whole. Turnover is expected to rise by 4.4 per cent in the next 12 months after reported growth of 4.1 per cent in the past year, whilst profit is predicted to expand by 4.8 per cent after reported growth of 4.2 per cent. The expected growth rates are one per cent and 0.3 per cent below the UK average, respectively.
Capital investment is set to slow from a reported 2.9 per cent over the previous 12 months to 2.6 per cent this year. The rate is 0.3 per cent below the UK forecast.
Firms in the region expect to reduce the rate of headcount growth in the next year. Employment is set to rise 0.7 per cent this year, down from 1.4 per cent recorded in 2004. This is one per cent below the UK average.