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Economic Insight

ICAEW Business Confidence Monitor (BCM): West Midlands

Q2: Business sentiment has improved in the West Midlands and is now above the UK average

The latest Business Confidence Monitor (BCM) shows business sentiment has strengthened in the West Midlands, and now stands above both the region’s historical norm and the UK average. Yet confidence is likely to be frail as companies and consumers continue to be impacted by a challenging economic period, with high inflation and interest rates.

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 27 March to 23 June 2023.

  • The Business Confidence Index for the West Midlands has risen above its historical average, but sentiment is likely to be fragile.
  • Domestic sales growth is outpacing the UK, with a stronger rise expected in the year ahead. Export growth has been weaker by comparison, but the outlook is more promising for the coming year.
  • Regulatory requirements and competition in the marketplace are the two most widespread challenges affecting businesses in the West Midlands.
  • Companies in the region plan to further raise their staff levels in the year ahead, while salary growth is expected to moderate.
  • Cost pressures continue to build, at a similar pace to the UK average, but businesses anticipate a considerable slowdown over the next year. This is also the case with selling prices.
  • Capital investment growth in the West Midlands is weak, and companies plan to ease the rate of increase in the coming year. Research & Development (R&D) budgets are currently flat, but some improvement is expected over the next 12 months.

Business confidence in the West Midlands

The Business Confidence Index for the West Midlands has risen to +9.4 in Q2 2023, sitting comfortably above both the historic norm for the region (+4.6) and the average for the UK (+6.1). Business sentiment in the West Midlands is, however, likely to be fragile given the challenging environment.

Domestic sales and exports

Annual domestic sales growth is high in the West Midlands, both in historical terms and when compared to the UK average, at 5.3% in Q2 2023. Companies in the region expect the rate of increase to quicken in the next 12 months, reaching 5.7%, continuing to outpace the UK as a whole. Export sales in the region are weaker, up just 1.8%, year-on-year, in Q2 2023. That notably lags the UK average, but businesses in the West Midlands are more positive about exports over the next 12 months, expecting a rise of 3.9% ‒ marginally behind the UK average.

Business challenges

Concerns over regulatory requirements have become widespread in the West Midlands, with 42% of companies citing this as a concern in Q2 2023, up from 36% in the previous quarter. Other challenges that have intensified include competition in the marketplace, with 37% of companies reporting it as a concern, making it the second most commonly mentioned issue. More businesses now report bank charges as a challenge than in Q1, reflecting a likely rise in banking costs.

Labour market

Companies in the West Midlands are increasing their staff levels, with employment growth running at 2.0% year-on-year in Q2 2023. While that is below the UK average, it is faster than the historic norm achieved in the region. Businesses are more optimistic about prospects over the next 12 months, with plans to expand their workforces at a faster rate of 2.8% ‒ the highest of any UK nation or region, except for the South East.

Salary growth is at a record high of 4.1% in the year to Q2 2023, underpinned by rising employment and mounting inflation. This is somewhat slower than the rate across the UK as a whole, but is twice as fast as the historic norm for the region. However, companies anticipate a slowdown over the next 12 months, although the projected rate will remain above the historical average for the region.

Input and selling prices, and profits growth

Cost pressures continue to mount for businesses in the West Midlands. This is particularly true for Manufacturers, an important part of the region’s economy. Annual input price inflation stands at 6.3%, broadly in line with the UK average, but also the region’s highest rate since the survey began in 2004. However, companies expect the figure to fall sharply over the next 12 months, to 3.8%. 

Businesses also expect selling price inflation to moderate in the coming year, from 5.1%, year-on-year, in Q2 2023 to 2.9%. Despite rising costs, profits growth is running at 3.5% in the latest quarter, and businesses expect the rate to improve considerably over the next year, reaching 4.8% ‒ similar to the projected UK average.


Capital investment in the West Midlands is currently at 1.6%, which is one of the slowest rates of growth across the UK and somewhat below the historic norm for the region. Businesses are even more downbeat about future prospects, with investment growth expectations of just 1.2% in the next 12 months. Worse still, R&D budgets are flatlining, although companies expect muted growth in the year ahead.