The fifth annual Manufacturing & Engineering survey, compiled by MHA MacIntyre Hudson (www.macintyrehudson.co.uk) from the responses of more than 550 SME manufacturing and engineering firms across the UK, reveals that 73% of Midlands firms are positive about their growth prospects in the coming 12 months, but 42% of them say that uncertainty over the terms of the UK leaving the EU is proving to be a barrier to growth.

In addition, major concerns remain over the skills shortage affecting the sector and the apparent lack of support for firms, following the demise of the Manufacturing Advice Service and the Growth Accelerator.

A total of 42% of the firms questioned said they are hoping to recruit over the next 12 months, but the inability to find skilled staff to do the job remains a major problem for 61% of those businesses.

Meanwhile, 96% of Midlands companies believe that their production costs will rise in 2016-17, due to the increasing cost of raw materials plus higher wages.

As a result, productivity gains are seen as important in bringing down costs, with 60% of firms saying they will not be passing the additional costs on to their customers.

Chris Barlow, partner at MHA in Birmingham, said: “The outlook for Midlands businesses remains strongly positive in terms of projected growth, although the result of the EU referendum has added uncertainty and affected confidence.

“The challenge remains to deliver the projected growth, given the difficulties in recruiting the right staff.”