Advanced manufacturing, engineering and business and financial services saw the biggest growth among West Midlands SMEs in the last three years, according to new research.

Industries that struggled the most in the downturn, with no signs of employment or turnover growth, included construction, retail and hospitality and tourism.

But business confidence is starting to return to small and meduim sized enterprises in Birmingham, the Black Country and Solihull, according to a study by the Marketing Birmingham Regional Observatory and the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP).

The research included a survey of 1,700 businesses across the GBSLEP area, which includes northern Worcestershire and southern Staffordshire, and the Black Country between December 2011 and March 2012.

Neil Rami, chief executive of Marketing Birmingham, said: “Our findings indicate that the local business community could be looking more confidently to the future and are ready to explore opportunities to develop their operations.

“SMEs in some of the region’s strongest sectors benefit greatly from the supply chains of the major companies that have invested here.

“Jaguar Land Rover is but one example of a global investor that has brought local business significant growth opportunities.”

The report also looked at SME growth over the past 12 months, attitudes to future growth and employment, and the sectors with the greatest incidence of ‘high growth’ businesses – those that have increased turnover by more than 10 per cent and staff numbers by more than 20 per cent each year during the last three years.

More than half the SMEs surveyed reported growth in profits over the last three years, while two thirds maintained or increased their turnover.

Almost 40 per cent of SMEs have increased their turnover in the past 12 months, while only 23 per cent experienced a decrease.

More than a fifth of SMEs in the region were found to meet the criteria needed to be considered ‘high-growth’.

While the research reports an optimistic mood for the majority of the region’s SMEs, others still face significant challenges in accessing the finance and opportunities needed to grow.

Chris Loughran, senior partner at Deloitte Midlands, said: “SMEs across the GBSLEP and Black Country area are fighting hard to grow and boost employment, but are still restricted by a lack of available finance.

“As credit remains difficult to access, it is crucial for these businesses to watch their costs closely to maintain the right level of working capital and identify the areas where investing that money will make a real difference to driving product demand – be it research and development, training the sales team or promoting the business to new customers.

“Investing can often ease the road to growth.”

Nearly half of SMEs in the region have not changed their staffing levels in the last three years, but more than a quarter were forced to reduce headcount and more than a quarter took on more workers. Some 53 per cent of respondents expected to increase their workforce over the next year, with only five per cent planning to reduce staff levels.

Skills and training were identified by nearly a third of respondents as a key driver of growth and 12 per cent cited skills deficiencies and recruitment problems as restricting business performance.

But less than half of surveyed SMEs planned to increase training in their organisation over the next year, with two per cent expected to cut back on this investment.

Alan Volkaerts, GBSLEP board member and operations director at Jaguar Land Rover Solihull, said: “Developing an innovative approach to tackling the issue of improving skills levels is one of the LEP’s key economic priorities.

“We have already launched the LEP Employment and Skills Board, which is a private sector led collaboration featuring companies, the public sector, education and training providers.

“If we are to achieve our desire of making the Greater Birmingham and Solihull area globally competitive, we have to ensure the skills agenda is at the forefront of everything we do.”