See-saw ride for region’s businesses as inflation hits trade

Businesses in theWest Midlandsare counting on a continued reversal of soaring inflation to improve their fortunes in 2012, according to a new survey. The last quarterly economic survey undertaken...

Businesses in theWest Midlandsare counting on a continued reversal of soaring inflation to improve their fortunes in 2012, according to a new survey.

The last quarterly economic survey undertaken by the West Midlands Chamber of Commerce (WMCC) in 2011 reveals a service sector growing at a subdued rate and the manufacturing sector showing signs of slowing.

The number of firms in the service sector reporting an increase in their domestic and export sales is up by only one per cent at 37 per cent compared with the previous quarter.

However, manufacturing firms continued to struggle. There was a drop in the number of companies reporting increased home sales from 45 per cent in the previous quarter to 41 per cent. And the increase in advance orders fell to 37 per cent from 39 per cent in Q3.

Exports performed little better among manufacturers with increased sales down to 37 per cent from 43 per cent and orders dropping from 37 per cent to 34 per cent.

Q4 was also marked by fewer service sector businesses and manufacturers reporting an increase in their workforce.

In Q3, 34 per cent of service businesses reported that their workforce had grown but in the last quarter only 29 per cent reported this to be the case.

For the manufacturing sector these figures were down from 35 per cent in Q3 to 31 per cent this quarter.  Over the next three months the percentage of businesses expecting their workforce to increase is 21 per cent, down from 22 per cent last quarter, while within manufacturing this figure is 25 per cent, down from 29 per cent.

Inflation is the biggest concern of both service businesses and manufacturers with 24 per cent of services and 23 per cent of manufacturers citing it as the biggest external factor putting pressure on their business.

Mike Ashton, spokesman for the WMCC, said: “It’s important to appreciate that this is not a decline, simply a slowdown in growth because tough economic conditions have dampened demand.

“Inflation has been rampant for many months and this has had a significant impact on demand and confidence.  Many businesses are holding off on investment and hiring in the hope that the global economy can bounce back from the many shocks that it has suffered.

‘We expect to see inflation begin to fall back in the coming months to the two per cent target set by the government for the Bank of England and many businesses will be counting on it. Inflation is currently running at 4.8 per cent and, thankfully, has fallen for the past two months.

“We hope that trend will continue. Much of the cause of inflation was through events abroad which have been out of our control.  Provided there is a solution to the eurozone crisis we are optimistic that business will begin to turn things around.

“However we also urge the government to ensure that UK plc can operate in an environment as free from regulation and red tape as possible.

“Needless form filling, health and safety assessments and bureaucratic and burdensome employment law divert time and money from investment and job creation and this needs to change.  We cannot expect business to lead us out of this economic quagmire if it is encumbered by a Gordian knot of regulation and red tape.”

 

 

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