Business confidence is running high in Coventry and Warwickshire, despite manufacturing exporters reporting increasing difficulties.

Nearly 56 per cent of service companies expect to increase their turnover in the coming 12 months, as do 33 per cent of manufacturers, although 35 per cent of them forecast a decline.

But competition is hotting up, the latest quarterly economic survey by the Chamber of Commerce, Training and Enterprise reveals.

Almost 60 per cent of manufacturers quoted competitions as the most important factor affecting their prospects, as did 46 per cent of service companies.

As a result the number of manufacturers expecting their profits to be hit climbed slightly to 44 per cent.

Service firms are more optimistic however, with 47 per cent expecting to raise their profits, mostly through increased prices. Only nine per cent expected prices to go down.

"Overall we still have a balanced picture, with, as always, some winner and some losers. But the service sector is making up for those manufacturers with declining order books."

said a spokesman for The Chamber.

The survey covered 107 companies in the manufacturing sector and 117 in the service sector-between them employing over 18,000 people.

Concern amongst manufacturers about exchange rates dropped significantly to 43 per cent, but export sales are still contracting.

Just over half of manufacturers reported declining sales, although 13 per cent had increased orders.

Domestic sales by manufacturers saw a general decline, with 18 per cent reporting increases – compared with 29 per cent the previous quarter.

But 40 per cent of service companies reported increased sales.

There was healthy news on the jobs front, too.

A slightly increased 36 per cent in the service sector took on extra workers in the last quarter of 1998, and 26 per cent expect to increase their workforce in coming months.

In manufacturing 27 per cent had increased their labour force, although 32 per cent had made cutbacks. Only 12 per cent expect to need more people during this quarter.

"With unemployment under three per cent in Warwickshire, and 5.3 per cent in Coventry, it is not surprising that both sectors are now experiencing considerable difficulty in recruiting staff."

The Chamber spokesman said.

Almost half of manufacturers reported "major problems" in getting skilled manual and technical labour.

The service sector’s problems were apread across a variety of jobs, but there was widespread difficulty in getting skilled and technical people and in filling professional and managerial vacancies.

As a result around a quarter in both sectors were having to increase their training budgets.

Pay settlements are forcing a third of manufacturers to raise prices. Very few has been affected by the minimum wage legislation in either sector.

The rising importance of the Euro was reflected in a third of manufacturing customers requesting or enquiring about paying in Ecus. Even the service sector, with far less export trade, 18 per cent of customers were interested in paying in Ecus.

The Chamber spokesman added:

"On the important front of investment in new plant and machinery, 20 per cent of manufacturers said they planned increases, although 26 per cent were cutting back on their plans.

"In the service sector there were twice as many reporting increases as those cutting back."