There was a small sign of hope for the West Midlands business community yesterday, as a survey found the drop in confidence levels may have bottomed out.

The UK Business Confidence Monitor, run by the Institute of Chartered Accountants (ICAEW) in England and Wales, said its latest results showed the level of business confidence in the West Midlands had stopped dropping in the last quarter for the first time this year.

Business confidence had plummeted by nearly a third going into the third quarter of the year, but had actually gone up slightly this quarter, bringing the region above the UK average.

Andeep Mangal, the president of the Birmingham and West Midlands Society of Chartered Accountants, said the results were a good sign for a business community that had been battered by the global financial downturn.

He added: “The survey offers some encouragement going into 2009 as West Midlands businesses continue to take steps to limit the damage of the current financial downturn. It is evident that cash management continues to play a vital role as more than one-quarter of businesses report late payment as a greater challenge to their performance than a year ago. Expectations for limited headcount growth next year, together with a determination by our local firms to contain spending wherever possible and defend their bottom line, show they are facing up to the tough decisions needed in the current climate.

“The right action now will help ensure our businesses in the West Midlands are positioned to take advantage of the economic recovery when it comes.”

The ICAEW said the region’s slightly better resilience in the housing market was a reason behind its comparatively good performance. The region has seen a 9.4 per cent year-on-year fall in house prices, compared to a decline of 12.4 per cent for the UK as a whole.

But James Watkins, the executive director of the West Midlands Business Council, said it was not wise to read too much into a one-off survey when attitudes and conditions in the marketplace were changing so quickly.

He said: “I would say that we have seen business confidence fluctuate quite violently over the months, and it’s dependent on the attitudes of banks and the prevailing economic climate. I think a lot of businesses were quite depressed about what was announced in the pre-Budget report, for example, whereas it was good news for others.”

According to the survey, businesses in the West Midlands have a relatively optimistic position. While it is still expected that turnover growth will fall to 3.8 per cent from 5.7 cent seen in the last 12 months, the projections of local firms stand above the 2.3 per cent turnover growth for the whole of the UK.

It is a similar story for profits, which West Midlands businesses expect to increase by 2.7 per cent in the coming year compared to 3.6 per cent growth last year. This again is above the UK-wide expectation of 1.6 per cent growth in profits for the coming 12 months.