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Business bullish despite prospect of latest rate rise; ECONOMY.

West Midland businessmen remain confident over the health of the economy despite an impending interest rate rise and the weakness of the dollar, the CBI has said.

The CBI's West Midlands council, which met yesterday, said its members were more optimistic about the next three months than of any similar period in two years.

Regional chairman Grey Denham said the West Midlands was typical.

"The past three months has been relatively stable but there is increased optimism over what lies ahead in the next three months - more so than at any time in two years.

"Any rate rise is factored into this and the feeling is we just have to live with it and get on with things."

He said if the rate rose 0.25 per cent it was likely a further rise would follow.

"If the bank opts for a 0.5 per cent rise things might change and the impact could be felt in the housing market, however, we'll just have to wait," said Mr Denham.

Of more concern to businessmen is the price of imports, particularly raw materials.

Mr Denham said the volatility of the metals market was having the expected effect on prices with steel, nickel and copper costing more. The price of scrap is also increasing.

He said the situation was partly due to increasing demand from the former Eastern bloc countries and Asia, where manufacturing was escalating.

"Despite this, there is more optimism among members they can pass on the rises, although in the long term we shall have to wait and see what the impact is," he said.

Businessmen are also concerned about the ongoing state of the currency markets with the continuing weakness of the euro and the dollar.

"The problem is not causing a loss in orders but concerns remain about the reduction in margins," said Mr Denham.

Harvey Williams, RICS West Midlands spokesman, pointed out the MPC had never raised the base rate by more than 0.25 per cent.

He said: "While we don't anticipate an increase of more than a quarter per cent, we cannot rule it out. However, we hope - for the sake of the West Midlands economy - we will only see the usual 0.25 per cent increase in the base rate in the short term, rather than taking a bigger hit."
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:May 10, 2007
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