HALF of small and medium sized (SME) companies (53%) in the North West are confident of the overall prospects for their businesses over the next 12 months, according to a new Baker Tilly survey, conducted by YouGov.

However, the survey, which gathered opinions from business decision makers across the North West, does highlight areas of uncertainty, with only 32% of respondents being confident for their business sector and only 13% having a positive view of the future for the North West region.

Lindsey Cooper, restructuring and recovery partner at Baker Tilly, says that while there may be a number of key reasons for the high levels of confidence in the respondents’ own businesses there are some other issues on the horizon. “Some will have taken the recent hard times as an opportunity – or have been forced – to refocus and restructure their businesses into leaner operations. However, we are concerned that many businesses have benefited in cash flow terms from HMRC Time to Pay Arrangements. Those businesses with little or no wool on their back may run out of options in coming months so cash management and involvement of key stakeholders such as Crown and Banks and assistance from their advisers will be critical in any decision making processes.”

Jill Jones, managing partner of the Chester and Warrington offices of Baker Tilly, said: “Businesses may be confident in what they can control and manage themselves but do appear to be less optimistic on the macro factors affecting their relevant sectors and regions, which they deem out of their control.”

Unusually for a region which traditionally benefits greatly from public sector investment, survey respondents in the North West were the least likely to believe that public sector cuts will have a negative effect on their companies’ turnover.

Issues that decision makers in the North West think their business will face in 2011 include a downturn in demand (53%) and competition from lower cost competitors (47%). Further concerns among 32% of respondents include the increase in the VAT rate to 20% and a fear of rising inflation in 2011. Ways in which they intend to respond to these challenges are through developing new products and services, increasing organic growth and expanding into new markets.

Mark Blakemore, managing partner of the firm’s Manchester office, said: “In light of wide-scale expected public sector job losses, increased VAT and general economic uncertainty, downturn in demand is understandably the most concerning issues. Retailers, for example, need to plan for what may happen if consumers begin to curb their non-essential spending following proposed benefits cuts. Business to business sales will feel the knock- on effect of reduced consumer spending.”

Dealing with the issue of VAT increase to 20% in January 2011 brought varying responses from North West businesses. More than a quarter (28%) are planning to absorb the cost within their business, while 10% intend to gradually increase prices over a period of time, leading up to January.

Some 37% plan to increase prices immediately after January 4, 2011, while 4% have already increased the prices. It is clear that some uncertainty still remains on how to deal with this challenge as 21% are still undecided on how to deal with the increase in VAT.

Perhaps, surprisingly, more than half of respondents from all UK regions (55%) felt all or most of their business needs had been met by their banks over the last 12 months. Those that would like their banks to be more helpful cited better lending terms and personalised advice and service as the main areas in which they would like to see improvement.

Interestingly, of all the UK businesses surveyed, nearly three quarters (74%) are not planning on raising finance in 2011. Of those that are (16%), the most popular method is through traditional bank lending.