4
WEST
MIDL
ANDS
CO
MP
AN
YG
UIDE
Br
ig
ht
er
pr
os
pe
ct
so
nh
or
iz
on
as
ec
on
om
ic
gl
oo
mg
at
he
rs
Th
el
ocal
econom
y
is
sho
wing
some
re
silience
despit
et
he
national
outlook
.
John
Bar
tlett,
Bank
of
England
r
eg
ional
agent
fo
rt
he
We
s
t
Mi
dlands
looks
at
the
cur
re
nt
climat
e
The
British
economy
is
currently
passing
through
challenging
times,
and
the
We
st
Midla
nds,
like
other
parts
of
the
UK,
is
not
immu
ne
from
the
ef
fects
of
the
global
credi
t
crunch
and
other
facto
rs
such
as
incre
asing
cost
pressure
s.
First,
let
me
look
at
the
nati
onal
pict
ure.
The
near
-term
outlo
ok
for
inflat
ion
has
deter
iorat
ed.
This
will
lead
to
as
queeze
on
households8217
real
take-home
pay
,w
hich
in
turn
will
slow
consumer
spending
and
out-
put
growth,
perhaps
sharply
.
So
the
balancing
act
faced
by
the
Mon-
etary
Policy
Committee
(MPC)
is
even
more
challenging
than
it
was
at
the
start
of
this
year
.
One
of
the
main
consequences
of
the
turbulence
in
financial
markets
that
first
be-
came
apparent
last
summer
has
beent
ighter
credit
conditions
across
the
economy
.
The
impact
has
been
most
apparent
in
real
estate
markets,
with
prices
falling
for
both
commercial
and
residential
property
.
In
these
circumstances
,h
ouseholds
are
likely
to
save
more
of
their
income
and
spend
less.
This
is
part
of
an
ecessary
rebalancing
of
the
UK
economy
away
from
spending
and
importing
and
towards
saving
and
exporting
8212ac
hange
that
is
being
supported
by
ster
-
ling8217
sd
epreciation
since
last
summer
.
So
far
this
year
,t
he
UK
economy
has
con-
tinued
to
grow
,a
lbeit
more
slowly
than
in
recent
years.
We
have
seen
some
indicators
of
weakness
in
consumer
spending
and
in
business
investment
plans.
Export
demand,
by
contrast,
has
been
holding
up
fairly
well,
despite
slow
growth
in
the
US.
In
Asia
in
particular
,t
he
pace
of
expansion
has
remained
robust,
maintaini
ng
the
upward
pressure
on
global
commodity
prices.
Looking
ahead,
the
central
view
of
the
MPC
at
the
time
of
their
May
forecast
was
for
output
growth
to
slow
sharply
through
2008,
reflecting
the
squeeze
on
real
in-
comes,
the
tightening
in
credit
conditions
and
weaker
prospects
for
world
growth.
That
is
aw
eaker
forecast
for
economic
growth
than
at
the
start
of
the
year
,b
ecause
an
umber
of
downside
risks
have
since
crys-
tallised.
Growth
is
expected
to
recover
gradually
through
2009
as
credit
conditions
begin
to
ease
and
the
depreciation
of
sterling
boosts
exports
and
reduces
imports.
The
risks
around
the
near
-term
outlook
are
balanced
(that
is,
growth
is
equally
likely
to
be
higher
than
lower)
but
further
out
the
risks
lie
on
the
side
of
weaker
growth,
con-
sistent
with
the
possibility
of
ap
rolonged
period
of
tight
credit
conditions
and
weak
demand.
The
near
-term
outlook
for
inflation
has
deteriorate
dm
arkedly
since
the
MPC8217
sF
eb-
ruary
forecast.
Annual
consumer
price
(CPI)
inflation
has
incre
ased
this
year
,a
nd
rising
ener
gy
and
import
prices
will
almost
certainly
push
it
higher
still
in
the
coming
months.
If
ener
gy
prices
stabilise,
inflation
should
start
to
decline
around
the
end
of
this
year
and
settle
around
the
two
per
cent
tar
get
in
the
medium
term.
There
is
considerable
uncertainty
over
this
profile:
for
example,
the
near
-term
out-
look
rests
on
assumptions
about
the
magni-
tude
and
timing
of
further
rises
in
domestic
gas
and
electrici
ty
prices.
Nevertheless,
it
is
likely
that
with
infla-
tion
expected
to
be
above
three
per
cent
for
several
quarters,
the
Governor
will
be
re-
quired
to
write
an
umber
of
open
letters
to
the
Chancellor
over
the
next
year
.
There
are
both
upside
and
downside
risks
to
the
medium-term
forecast
for
inflation.
On
the
downside,
am
ore
prolonged
pe-
riod
of
subdued
demand
growth
could
open
al
ar
ger
mar
gin
of
spare
capacity
,p
ulling
down
on
inflation.
On
the
upside,
inflation
could
remain
above
two
per
cent
for
longer
if
above-tar
get
inflation
begins
to
af
fect
the
expectati
ons
of
those
setting
wages
and
prices.
Both
sets
of
risks
have
increased
this
year
.
To
try
to
bring
CPI
inflation
back
down
to
the
tar
get
too
quickly
would
result
in
an
undesirab
le
degree
of
volatility
in
output.
But
this
emphatic
ally
does
not
mean
that
the
committee
will
ignore
the
near
-term
rise
in
inflation.
The
exte
nt
of
that
deviation
from
tar
get
this
year
is
likely
to
af
fect
the
behaviour
of
those
setting
prices
and
wages.
So
the
committee
judges
that
some
slow-
ing
in
demand
growth
is
necessary
this
year
in
order
to
keep
inflation
close
to
its
tar
get
in
the
medium
term.
As
Ii
ndicated
at
the
start,
the
commit-
tee
is
facing
its
most
difficult
challenge
yet.
We
are
travelling
along
ab
umpy
road
as
the
economy
rebalances.
But
interest
rates
must
not
be
set
with
the
intention
of
preventing
that
adjustment.
As
the
committe
e8217
sr
emit
states,
8220the
real
sta-
bility
upon
which
economic
prosperity
is
founded
requires
that
inflation
remain
low
and
stable
for
al
ong
period
of
time8221.
Inflation
will
return
to
tar
get
and
growth
will
eventually
recover
to
as
ustainable
rate.
But
we
will
need
to
be
patient.
So
what
does
all
this
mean
for
Birming-
ham
and
the
We
st
Midla
nds?
Broadl
y,
the
outlook
is
similar
to
that
described
above
for
the
UK
economy
as
aw
hole.
And
we
here
are
certainly
see-
ing
more
subdued
spending
by
consumers,
alongside
falling
property
prices.
But
the
mood
in
much
of
the
business
community
is
far
from
downbeat.
There
is
certainly
more
caution
and
uncer
-
tainty
than
there
was
ay
ear
ago,
but
many
of
the
firms
to
whom
Is
peak,
and
especially
those
that
export,
do
still
feel
reasonably
op-
timistic
about
prospects
for
the
coming
year
and
beyond.
In
the
important
professional
services
sector
,fi
rms
operating
locally
are
perhaps
suf
fering
somewhat
less
from
the
ef
fects
of
the
credit
crunch
than
their
counterparts
in
London.
But
cost
pressures
are
ab
ig
concern
for
all
busines
ses,
especially
in
relatio
nt
oe
n-
er
gy
,f
uel,
food
and
other
commoditie
s,
and
mar
gins
are
under
some
pressure,
especially
when
selling
to
consumers.
On
the
other
hand,
the
weaker
exchange
rate
is
helping
competiti
veness
and
labour
costs
are
not
rising
faster
than
in
recent
years.
Id
etect
aw
idespread
view
that,
if
we
can
get
through
the
next
few
months
without
further
shocks
,t
hen
prospects
should
start
to
brighten.
And
the
number
of
cranes
in
Birmingham
certainly
suggests
that
there
is
confidence
for
the
future,
both
in
the
city
and
in
the
wider
region.
Bir
mingham
8217s
pr
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essional
ser
vic
es
sec
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ys
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or
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tr
ole
in
the
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onom
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nd
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mong
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