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Economic Insight

ICAEW Business Confidence Monitor (BCM): West Midlands

Q4: Business confidence edged up and is strongest in the West Midlands

The latest national Business Confidence Monitor (BCM) for Q4 2023 shows a slight shift in sentiment within the quarter. However, the quarter-on-quarter improvement in sentiment is marginal, remaining broadly steady at a similar level over the last few quarters. Overall confidence continues to fall short of the pre-pandemic average.

The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 17 October to 15 December 2023.

  • Business sentiment improved slightly in the West Midlands and, at +11.4 in Q4 2023, confidence is higher than elsewhere in the UK.
  • Annual export performance was stronger in the West Midlands than any other nation and region, with further improvements anticipated over the coming year. Domestic sales growth continued to soften, and while businesses anticipate improvements, expectations are somewhat lower than elsewhere.
  • Input price inflation has eased considerably and may have passed its peak, and companies expect it to moderate further. The same is true for salary growth, and businesses expect to lift salaries more slowly than elsewhere. 
  • Companies are still raising their selling prices, albeit markedly slower, and the pace is expected to soften, though prices are expected to rise faster than in many other parts of the UK. This helps to explain the notable uplift expected in profits growth.
  • Customer demand is now the greatest rising challenge faced by businesses, overtaking regulatory requirements which, while still prominent, are less widespread. Late payments may be reemerging as a major source of difficulty.
  • R&D budgets are growing faster in the West Midlands than elsewhere, but prospects are less positive. Increases in capital investment spending are slowing, mirroring trends over recent quarters, but it is expected to accelerate, making the region among the strongest in the UK.

Business confidence in the West Midlands

Companies in the West Midlands are most optimistic about prospects over the coming year. At +11.4 in Q4 2023, the Business Confidence Index for the West Midlands improved slightly compared to the previous quarter (+10.6) and continues to outperform the region’s historical norm. Optimism is likely supported, in part, by the rebound seen in the automotive sector, which is particularly important to the West Midlands economy.

Domestic sales and exports

Healthy export performance is also likely to have provided a boost to business sentiment in the West Midlands. Indeed, export expansion has been stronger in the region than elsewhere across the UK, with growth of 3.3% in the year to Q4 2023. Companies predict a pick-up in growth, to 3.8%, and this is likely another factor underpinning the region’s overall optimism.

Domestic sales growth, however, softened in the year to Q4 2023, rising by 2.8%. This broadly aligns with the region’s historical performance (3.1%) but lags the national average (3.6%). And while businesses in the West Midlands anticipate faster increases in domestic sales over the next year (4.3%), expectations are joint-lowest with London and the East Midlands.

Business challenges

Customer demand has become increasingly concerning for businesses in the West Midlands over recent quarters and it is now the most prevalent growing challenge in the region, reported by 42% of businesses in Q4 2023. This is broadly in line with the region’s historical average. While customer demand issues have overtaken regulatory requirements, which are now less widespread, these remain prominent concerns, with one in three companies citing them in the latest quarter.

Financial challenges relating to late payments may be reemerging as a major source of difficulty in the West Midlands. In Q4 2023, around one in four companies reported it as a rising issue, slightly higher than the historical average and the highest it has been since Q1 2021.

A few challenges are easing which may also help to provide a boost to sentiment in the region. The proportion of companies reporting bank charges and the tax burden as growing challenges eased in Q4 2023 and are lower than elsewhere in the UK. That said, almost one third of businesses cite staff turnover challenges as growing issues.

Labour market

Annual employment growth in the West Midlands continues on its downward path, mirroring patterns seen over recent quarters. At 1.6% in Q4 2023, it is somewhat ahead of the region’s historical norm and broadly aligns with the national average. Businesses expect a similar rate of outturn in the coming year but, at 1.4%, labour force expansion is anticipated to be slower in the West Midlands than elsewhere in the UK.    

Salary growth may have passed its peak in the region and, at 3.5% in the year to Q4 2023, it is among the weaker rates of uplift. That said, it is still notably ahead by historical standards for the West Midlands (1.9%). Companies plan to further moderate these increases over the next year, with expected salary growth of 3.0% ‒ which is joint-lowest with London and the South East.

Input and selling prices, and profits growth

Cost pressures appear to have passed their peak in the West Midlands and have eased considerably in the latest quarter. At 4.4% in Q4 2023, annual input price inflation in the West Midlands is among the slowest in the UK. Businesses expect it to moderate further in the coming year to 3.1%, bringing it closer to the region’s historical norm.

With salaries and input costs remaining elevated, businesses continue to increase their selling prices, though at a much slower rate than the previous quarter. Selling prices are now 3.5% higher in Q4 2023 than a year ago, and companies anticipate the rate to cool further to 3.0% in the coming year. However, it remains high relative to historical standards and is ahead of expectations across most nations and regions. The net result is that profits growth has moderated to 1.5% in the year to Q4 2023, but companies forecast performance to improve in the next 12 months, to 4.0%.


Businesses in the West Midlands are raising R&D budgets faster than elsewhere in the UK, and they are running at 3.2%, year-on-year, in Q4 2023. While this is considerably outperforming the region’s historical average, businesses anticipate a sharp slowdown in the next 12 months, to 1.2%, falling slightly behind the UK average. Elsewhere, annual growth in capital spending continues to ease, mirroring trends in recent quarters, though it is up by 1.3% in Q4 2023. Companies anticipate a notable pick-up over the coming 12 months, to 2.2% and this is expected to put the region among the better performing areas in the UK.

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