THE latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) has found that businesses in the West Midlands are starting to feel the benefits of the burgeoning UK economic recovery, but are still not as confident as their national counterparts.

Confidence in the region has been on an upward trend from a low of +4.3 in Q4 2012 and now stands at +23.7, compared with the UK average of +31.7.

Businesses in the West Midlands have reported relatively weak annual growth in sales volumes and domestic sales of 2.1% and 1.4% respectively. Growth in the key performance indicators has weakened over the last 12 months as trading conditions have remained tough in the region. Turnover growth has been equally low, standing at 1.6% over the past year.

Confidence has continued to rise, though, and companies are expecting things to pick up further over the coming year. Sales volumes are estimated to increase by 4.1% and domestic sales to rise by 3.7%. If realised, these figures will support an anticipated 4.2% rise in turnover growth over the next 12 months.

Tom Madden, ICAEW regional director for the Midlands, said: "Despite confidence in the region stubbornly remaining below the national average, there are still reasons to remain positive.

"Export growth in the area has remained relatively strong, with businesses reporting an increase of 3.4%. They expect this to continue into the next year with growth of 3.2%. The growth in exports is vitally important to ensure that a trade-led recovery in the UK is supported, and the region's BCM results certainly suggest that to be the case."

Conditions in the West Midlands labour market remain tough, with businesses this quarter reporting an increase in staffing levels by just 0.4%.

Employment growth has hovered just above the zero mark for the second consecutive quarter now. With unemployment remaining high, employees consequently have little wage bargaining power. As a result, businesses only expect to increase average basic salaries by 1.8% this year.

Dave Munton, regional managing partner at Grant Thornton, said: "It is disappointing to see that capital investment among businesses in the West Midlands remained very weak, increasing by just 0.7% over the past year.

"However, the upturn in confidence levels over the last 12 months means that businesses are far more optimistic about next year's capital investment levels, which is an encouraging sign for the region's economy as such investment is a key requirement for a sustainable recovery. "