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Business confidence hits high

The West Midlands is ranked second highest region in the UK for business confidence, according to the latest Accenture / S&P Global UK Business Outlook.

UK business confidence fell to a joint record low in June, but remained the highest in Europe and above the global trend.

While the findings come amid global economic uncertainty, positive news for the West Midlands was that when compared to all UK regions it saw the smallest dip in its rating (-3.7%) since February.

This small dip meant that business confidence in the region (+39%) sat comfortably above the UK average (+28%) and the global average (+22%), ranking as the 2nd highest region in the UK.

The sentiment held by the business leaders in the West Midlands was also reflected by the region's higher profit expectations for the next 12 months. Standing at +10.7%, this was higher than the comparative feeling held by business leaders in the capital (+4.4%) and well above the national average, which stood at -2.2%. 

Commenting on the survey, Paul Stanley, Midlands lead for Accenture, said: “We are all too aware of the inflationary and operational challenges being faced, not just by the UK, but by the entire world at the moment. Despite being up against incredible uncertainty, it's encouraging to see the region's business leaders showing determination to weather the ongoing storm.

"The last few years have shown just how crucial regions like the West Midlands are to the UK economy, with industries such as construction and automotive showing the importance of innovation in the face of adversity. Regional leaders must carry this mindset forward by investing in the right technology and their workforce to ensure they continue to be resilient against constant change."

Across the country, a net balance of 28% more private sector firms forecast their activity to increase over the coming year. This is half the level recorded in February (+56%), and the joint-lowest since the survey began in October 2009. Both the EU and global averages were below the UK at +16% and +22% respectively.

Although reduced, this positive activity forecast is coupled with the fact +21% of UK employers predict a solid rise in employment - almost double that of the rest of Europe at +12% - as firms look to fill staffing gaps that surfaced during the COVID-19 pandemic.

Again, the West Midlands ranked above the national average with +30.2% of respondents expressing positive employment predictions.

UK businesses also expect rapidly rising inflation, fuelled by increased energy costs, to drive down margins, as profit forecasts turned negative for the first time in the survey's history, at -2%.

The data reveals that companies are concerned that they will be unable to pass on higher costs to customers, with +59% of firms predicting an increase in their output charges - the second highest-on record, following a survey record of +62% in February.

Cost expectations remain high despite 3% fewer companies predicting a rise in staff wages, down from +83% to +80%. Manufacturers are relieved to see a decrease in supply chain challenges, reporting their lowest expectations for non-staff costs in 12 months.

Optimism is strongest among makers of electrical and transport goods (+63%), as firms praised new product opportunities, sustainable investment, and lower metal prices. At the other extreme, hospitality firms posted a negative outlook for the first time in nearly four years (-4%), as the cost-of-living crisis drives lower consumer spending on travel, dining and leisure.

Commenting on the survey, Matt Prebble, strategy and consulting lead, UK & Ireland at Accenture, said: “Inflation and a cloud of economic uncertainty have understandably knocked business confidence. While some predict lower profits and are cutting back on research and development, it is worth noting that the more confident sectors are continuing to sustainably invest in new products.

"Over the past few years UK business leaders have proven resilient in the face of constant change which may explain their optimism compared to other countries.  It is this mindset to make transformational change where it is needed most, invest in talent and new technologies that will put them in a strong position to take market share when the current turbulence passes."