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ICAEW Business Confidence Monitor (BCM): West Midlands

Q2 2019: Businesses are restricting investment spending amid ongoing uncertainty

Confidence for the West Midlands is again in negative territory. Brexit remains an important issue for companies in the region, reflected in the precautionary stockpiling that businesses are undertaking. And while businesses report faster domestic sales growth than previously, this is substantially offset by weaker exports growth. Companies are also planning to show considerable restraint in the coming year in terms of investment growth.

Business confidence trend in West Midlands

The Business Confidence Index remains negative for the West Midlands in Q2 2019, at -16.9. Brexit is likely to be a key issue here, particularly for the region’s large manufacturing sector. The proportion of companies in the region that report above normal stock levels of raw materials and components stands among the highest in the UK, suggesting that companies are taking precautionary measures to reduce their exposure to a no-deal Brexit.   

Domestic sales and exports

Companies are nevertheless receiving a boost from faster domestic sales growth of 5.1% year-on-year in Q2 2019, comfortably outpacing the national average of 3.5%. However, any confidence gains derived from this are probably being more than countered by subdued export growth, which, at just 1.8%, is the weakest across the UK. 

Business challenges

There is also a range of challenges facing businesses in the West Midlands. Notably, the proportion of companies that cite late payments as a growing source of difficulty is up from 15% in Q2 2018 to 26% in Q2 2019. 


Businesses are also restricting investment growth, possibly reflecting the weakness in confidence and the factors behind it. Capital investment and staff development budgets are rising by just 0.9% and 1.2% year-on-year respectively, with the former increasing at the slowest rate across all of the UK and both significantly down from a year ago. 

Prospects for the next 12 months

The overall weakness in company confidence is also revealing itself through the business outlook for the year ahead. Companies foresee moderations in both domestic sales and profits growth, to 3.5% and 3.2% respectively, relative to 5.1% and 4.1% in the past year. Businesses, however, are more upbeat about export growth, which they expect to rise at a faster rate than in the year to Q2 2019, at 3.9%. 

The generally cautious investment behaviour of companies is set to continue in the 12 months ahead. Staff development budget growth is set to slow to 0.8% year-on-year, while growth in Research & Development spending will ease from 2.4% this quarter to 1.4% in the year ahead.