Birmingham's economy is on a relative high note, as growth in sales continues across each sector, according to the latest Birmingham Chamber of Commerce and Industry Quarterly Economic Survey.

Despite an increase in businesses' concerns about issues such as inflation, interest rates and a strong pound, and the general expectation of a slowdown, the majority anticipate increased profitability and turnover this year.

Katie Teasdale, BCI policy adviser, said: "Generally, confidence remains high among Birmingham businesses, despite the headlines of doom and gloom that we read every day. Three-quarters of manufacturers and 80 per cent of service companies expect turnover and profitability to increase over the next year.

"Businesses do not expect recession, although they are bracing themselves for a slowing in the rate of growth in 2008."

Exports, particularly in the service sector, bucked the trends of recent quarters, with over 70 per cent of companies, usually IT, financial and hospitality firms, reporting sales abroad increasing over the past three months, compared with just 30 per cent previously.

Sixty per cent of them say orders have increased, more than double the amount from the previous survey.

Ms Teasdale added: "With the strong pound and relatively high interest rates, we wouldn't necessarily expect such positive export news. This is encouraging and is contrary to recent trends that have pointed to a slowdown across export markets and may reflect the opening up of opportunities in Eastern Europe.

"The strength of the pound against the dollar has made it a difficult exporting environment, but these service sector export increases may reflect the recent fall of the pound to a four-year low against the euro.

"We know from other surveys that Birmingham firms export disproportionately to Europe rather than the US."

On the domestic front, just over half of service companies have increased sales over the previous three months, a rise of four percentage points on the last survey. For manufacturers, 38 per cent say sales have increased while 45 per cent report they have remained constant.

The number of manufacturers who have decreased their workforce in the previous quarter rose to 20 per cent from nine per cent previously. However, this is tempered by the prediction that nearly a third of them will increase their staff over the next three months, up from 15 per cent.

Of those seeking to recruit, 38 per cent report difficulties, mainly across skilled manual and technical grades of staff.

"Businesses do not expect recession, although they are bracing themselves for a slowing in the rate of growth in 2008

Katie Teasdale

This is a sign of an increasing skills gap in highly specialised positions, such as toolmakers, and is also reflected in the service sector where a third are struggling to fill professional vacancies.

Ms Teasdale added: "Investment intentions remain strong despite the credit crunch, which at least for now appears to be much less debilitating for SMEs than some larger firms. Manufacturers also seem to be more resilient than ever after diversifying into new markets.

"These are all pressing issues, but the survey also reports that external factors such as inflation and interest rates are also impacting on businesses. Nearly one-in-five service sector companies have stated that interest rates are a concern, up from just six per cent in the previous quarter.

"A similar amount of manufacturers have the same concerns, as well as inflation, which continues to impact on margins." ..SUPL: