ROBERT VERKAIK FINDS THE STRENGTH OF STERLING AND THE ECONOMIC DOWN-TURN IN SOUTH-EAST ASIA ARE CAUSING FLUTTERS IN THE MIDLANDS President Clinton's surprise appearance in a Birmingham pub during last month's G7 summit was a poignant reminder that businesses in the midlands have an international reputation.

But these are uncertain times for local businessmen.

The Confederation of British Industry (CBI) reports prices for export goods across the region have fallen to a 30-year low.Now additional evidence amassed by the CBI indicates that the resurgence of a domestic market is beginning to waver.

Beverley Nielsen, regional director of the CBI in the west midlands, explains: 'The rapid appreciation of sterling has caught people and made it difficult for businesses to plan ahead and cope with contracts that have already been signed.'The impact of sterling's rise on the midlands is particularly pronounced because the region is so dependent on its manufacturing industries.

In the west midlands, the Birmingham conurbation is home to a range of automotive-related companies, such as Michelin and Goodyear, Britax and Lucas, as well as leading car manufacturers such as Jaguar and Rover which have slowly been building their overseas markets in the past few years.

Birmingham also produces half the country's jewellery and is the largest producer of rubber and plastic.Fixed export contracts which have run over a period of six months or more have steadily fallen in value as the sterling exchange rate eats into profit margins.

The same is true for carpet manufacturers in Kidderminster and the ceramic industry of Staffordshire, which is the largest in Europe.

In the east midlands, it is the textile and footwear industries of Nottinghamshire which are hardest hit.

Ms Nielsen says some companies during the last year have been taking losses in export contracts just to retain a foothold in a particularly competitive market-place.All this helps to account for the depressing results of a recent CBI regional survey of the west midlands which found that business optimism has fallen to its lowest level since the recession in the 1990s.

Other statistical evidence from the CBI has confirmed what businessmen have been telling Ms Nielsen -- export orders have consecutively fallen for the last five CBI quarterly surveys of the region's businesses.

Ms Nielsen says that the domestic market is faring better, and therefore helping to offset the impact of strong sterling.

Yet she claims this too has its weaknesses.Ms Nielsen explains: 'In our last regional trends survey we did predict a fall in total new orders which suggested that domestic demand was also slowing.' Particularly badly hit are the carpet manufacturers who are no longer reporting bulging order books for the retail market, confirms the CBI.

From this, concludes Ms Nielsen: 'We would question the underlying strength of the UK economy.'The gloomy economic picture is repeated in the east midlands.

Earlier this month, following a meeting of the CBI's influential east midlands regional council, chairman Paul Hodgkinson said: 'It is clear the level of sterling is still hurting manufacturers in the region.

Our members are telling us that export sales are continuing to slow and some companies domestic orders are now coming under pressure.'Mr Hodgkinson's simple answer to the region's woes is to increase productivity.

'In the 1980s Britain cut the productivity gap compared with our competitors, but over the last three years our rate of improvement has not kept pace with that of our competitors in Europe and the US,' he says.Peter Stevenson, the CBI's regional director for the east midlands, says the sterling problem is compounded by the economic down-turn in south east Asia.

'Some of our members have got operations out there or trade with [Asian businesses],' he says.

The one finding which will gladden the hearts of solicitors in the midlands is the fact that professional services are bucking the disappointing economic trend.

'Even so', says Mr Stevenson, 'some of them have got skills shortages and cannot get the right calibre of people.'Lynne Imeson, director of policy and public relations at the Nottinghamshire Chamber of Commerce, says the chamber has worked hard to forge links with solicitors and accountants so their members can benefit from the expert guidance during difficult economic times.

But she adds: 'During boom times businesses find commercial solicitors just as important and the solicitors are benefiting from this relationship.

Solicitors are regularly invited to commerce functions and networking events to help foster greater mutual understanding of each other's businesses.'Nottingham First is an independent company which has been set up to promote Nottingham over other professional services centres.

Instead of going to London or Leeds for legal advice, Nottingham First encourages businesses to look locally first.Inward investment in the region has generally fared better in the west midlands than the east midlands.

This is largely to do with the huge labour force available in the Birmingham area.

But Ms Imeson points out that cities such as Nottingham do not have enough suitable sites for the large developments needed by the south east Asian car manufacturers.

Derby has had more luck in this respect; two years ago Toyota located a large plant in the city.Now the East Midlands Development Company, based in Nottingham, is helping to put the region on the international inward investment map.

'This is a government-financed body which exists to attract inward investment to the region,' explains Mr Stevenson.Other central government initiatives in the east midlands have been aimed at the fall-out from the closure of the region's coal mines.

A number of schemes continue to help unemployed miners find new work while regeneration projects are reclaiming the scarred land.

Despite all this effort, there are still areas of north Nottingham and Derbyshire with unemployment rates of higher than 25%.On a brighter note, industries such as construction and leisure are doing relatively well, as are manufac turing industries which feed into these businesses.

Ms Nielsen explains: 'Ceramic companies which feed into this market are faring much better than their exporting counterparts.

Armitage Shanks is doing well as are those ceramic businesses which sell to the hotel and catering industry.'But as long as the cranes are working over the Nottingham skyline, says Ms Imeson,' there is a lot to look forward to.'BIRMINGHAM'S TOP FOUR FIRMS HAVE REALISED THEY HAVE A GREAT AFFINITY WITH PRACTICES IN THE AMERICAN MID-WEST, WRITES MIKE YUILLEThe decision of Birmingham's aldermen to twin their city with Chicago some years ago is a fitting reflection of the aspirations today of Birmingham's top commercial law firms.

While Tony Blair talks of closer links with Europe, Birmingham's lawyers are looking to the American mid-west for their future business growth.All of Birmingham's big four -- Wragge & Co, Pinsent Curtis, Eversheds and Edge & Ellison -- are profiting from growing business links with the industrial heartland of the US.

Globalisation within the automotive and engineering industries in particular is encouraging mergers, acquisitions and joint ventures on a world scale.'We have all woken up to the potential of the US,' says Peter McHugh, a partner in Eversheds's corporate team in Birmingham.

'If you visit Chicago, Detroit and Pittsburgh, the law firms there have a great affinity with big regional firms here in terms of attitude, type of work and clients.'While UK business has remained buoyant for the Birmingham firms, they report that the flourishing Anglo-US relationship has helped increase significantly both the volume and value of commercial work.David Hull, the corporate department head at Edge & Ellison, says his firm is increasingly finding US parties in deals.

The firm's figures speak for themselves: for the first quarter of 1998 the firm completed corporate deals with a combined value of more than £600 million, of which 20% involved acting for US clients.

By May, the deal value hit £1 billion, of which some 30% involved US clients.

Last year, the firm conducted £1.7 billion worth of deals in total.In a city where a sizeable corporate transaction may have been valued at somewhere around the £10- to £40-million mark, the current trend for deals worth around £100 to £300 million indicates something of a boom.

'International mergers and acquisitions is the area generating the most business, both in terms of value and volume,' says Mr Hull.

His team has recently handled a £300 million eurobond issue for a US client, the £280 million takeover of lender Cityscape's mortgage book by Ocwen Financial Corp of Florida, and a series of acquisitions by Waterlink Inc, a US environmental controls business.In terms of regional business, the west midlands is a mature, well-lawyered market and international business has to be an essential element of the growth strategies of the big four, as well as that of the smaller second-tier commercial firms.But the big four have radically different approaches to achieving this growth.

Pinsent Curtis, where around 30% of turnover is from national clients and 20% from international clients, is focusing on its strong London presence to increase its position among the bigger FTSE-listed companies.

Managing partner Julian Tonks says: 'If you compare our list of clients, we already act for much larger companies than the other Birmingham firms.

Now we want a stronger penetration of that market and we see the interplay with our London office as absolutely fundamental.' But the US also holds swa y in his thoughts.

'Chicago is our gateway to the mid-west,' he says.The firm, which boosted turnover by 16% to £347 million during 1997, has a clear view of its market position.

'In Birmingham, Wragge & Co is our strongest competition,' says Mr Tonks.

'They're successful in acting for regional companies and have done work for larger companies, but they don't have as many close relationships with the large companies as we have.

In national and international clients, we are competing with London.' Mr Tonks's stance looks justified, with such blue chip clients as banking group HSBC, engineering company GEC Alsthom, Barclays Bank and food company Smith & Nephew.Meanwhile, Wragge & Co, which is achieving a 24% annual compound growth in turnover, remains committed to the single-office approach, maintaining that a top-quality service is best provided by a concentration of resources.

Quentin Poole, the managing partner of the firm, rejects arguments for a London office or a regional merger, saying: 'We are a national firm, based in one location.

Out of our top 40 corporate clients by size, 24 of them are not in Birmingham.' Blue chip clients include British Airways, Stakis Hotels, engineering company GKN, and the Department of Trade and Industry.Regional clients remain commercially healthy despite the onset of a technical recession in the manufacturing sector.

As these clients provide anywhere between 40% and 60% of the turnover of the big firms, they are the focus of increasing competition between lawyers.

Local clients provide a steady flow of medium-sized rights issues, flotations, mergers and acquisitions and commercial property deals in office block and town centre renovation schemes, says Mr Poole.

Regional venture capital work is also strong.

'Clients' share prices are still high, despite the signs of recession, and there's lots of institutional cash washing around,' says Mr Poole.Edge & Ellison, after a fraught year that saw the departure of lawyers, a failure of merger plans with Pinsent Curtis and its rejection of Dibb Lupton Alsop's merger offer, drafted a three-year strategy plan entitled 'The Way Forward'.

It aims to double the size of its 125-staff London office and treble its international business.

But with a Leicester office as well, giving coverage across east and west midlands, the local region remains important, says managing partner James Retallack.

'As a business centre, geographically it's perfect,' he says of Birmingham.Birmingham's fab four is soon to turn into the famous five, if Dibb Lupton Alsop's performance is anything to go by.

Data published last month from corporate finance analysts Corpfin UK showed Dibb Lupton Alsop ranking third after Eversheds and Wragge & Co for citations in corporate deals in the west midlands.

Nick Seddon, the bullish head of Dibb's two-year-old Birmingham office, more than doubled corporate department revenue last year and lifted overall turnover by 30% to £10.1 million.

'The sky's the limit at the moment,' says Mr Seddon.

'We are seeing a mass of local activity on a scale not seen since 1987, with an even spread across all types of corporate work.

Commercial property is booming and litigation is going like a stream train.' And, as with other local firms, US clients are playing a role in Dibb's success, Mr Seddon says.Garretts, part of the Arthur Andersen legal empire, is also achieving good results as a second-tier firm.

'There's a hell of a market for quality firms in Birmingham,' says Paul Finlan, managing partner of Garretts's Birmingham practice.

Much smaller than t he 200-lawyer firms of Pinsents and Wragges, Garretts nonetheless is taking some good mergers and acquisitions work, including a recent £47 million continental acquisition by Wagon Industrial Holdings.Plans to expand the London office were set back by the untimely failure of the Arthur Andersen deal with Wilde Sapte; a transaction which would have given Garretts a significant new presence in London.

But Mr Finlan expects the direct link to Andersen's 1,000-lawyer network will bring future dividends in terms of referrals.Martineau Johnson, less than half the size of Pinsents and Wragges, is a successful niche player in utilities, education, tax, private finance initiative and venture capital trust (VCT) work.

Its expert lawyers give it national clout, advising as it does the National Grid Company and a clutch of other utility businesses, some 16 universities, 30 colleges of further education and five independent schools, as well as running two of its own VCTs.David Gwyther, managing partner of Martineau Johnson, says: 'We're seeing growth in all our practice areas.' Martineau's closest rivals are Gateley Wareing and Shakespeares, which both have a strong reputation in private company work.Wolverhampton, the closest commercial and legal centre to Birmingham, sports two key commercial firms: 22-lawyer Foster Baxter Cooksey, and 20-lawyer Manby & Steward Inc Woolley Beavon.

Fosters does a lot of corporate deals, with the biggest worth around £314 million, says managing partner, Graham Sower.

Most companies move on to larger law firms once floated on the stock exchange, but Fosters has been retained to do property work for one public company.

'We are looking to grow the firm generally,' says Mr Sower.RACHEL HALLIBURTON SURVEYS THE LEGAL POWER BASES OF THE MIDLANDS OUTSIDE BIRMINGHAM, AND FINDS NOTTINGHAM AND LEICESTER HEALTHYThe midlands has refused to bow to London's reputation for supremacy in commercial law, and during the past decade several new power points for commercial work have been set up both in the east and west midlands.Derek Bambury, managing partner of leading Nottingham firm Browne Jacobson, says that although the midlands has been seen historically as a fragmented market divided between the east and the west, this has changed.

Today the midlands has very much become a single market-place, with leading firms establishing their presence strongly across the entire area.Outside Birmingham, Nottingham is considered the centrepoint for leading firms.

Eversheds has a branch in Birmingham, but has also capitalised on the strong core of professional accountants, bankers and large companies around Nottingham to open an office there with a thriving commercial law department.

On the corporate side, Eversheds is increasing its international work and last year completed acquisitions in Italy, the US and Brazil.Browne Jacobson is the other Nottingham giant.

Like Eversheds, it is dominant in commercial litigation and commercial property, and now leads the field in environment and planning law.Mr Bambury says: 'Browne Jacobson is a balanced practice, achieving major player status in corporate and commercial law, and in insurance.' Freeth Cartwright Hunt Dickins, too, is cited as one of the Nottingham heavyweights.

While it vies with Eversheds, Browne Jacobson, Shoosmiths & Harrison and Hewitson Becke & Shaw for pre-eminence in most areas of commercial law, it is matched only by Nottingham firm Nelsons when dealing with professional fraud, and it also demonstrates significant expertise for participating in large-scale Department of Trade and Industry and regulatory body investigations.Clients with family problems in the Nottingham area will normally either find themselves making a track to Freeth Cartwright Hunt Dickins's door, or they will go to the predominantly family law-based firm, Rupert Bear Murray Davies.

Rupert Bear, former president of the Nottingham Law Society, set up the firm in 1992.

He says: 'We deal with fairly wealthy people, in divorce law, ancillary relief and private child care.' The firm was involved in a landmark case -- Thomson v Thomson 995 2 Family Law Reports p668 2 May judgment -- which challenged a husband who said that because he was a minority shareholder in his family company, he could not afford to pay the maintenance asked for by his estranged wife.

The case set a precedent for full enquiries into trust fund issues in similar divorce cases.Farther south, Leicester firm Marron Dodds is most famed for its large criminal practice, and its trailblazing planning section.

Billhar Uppal, a partner at the firm, says six months ago the firm acted for the first stalker convicted in this country, and it is also famed for its work with juvenile crime.

Its planning department is involved with the expansion and development of several PLCs.

In the midlands it is recognised as one of the leaders in this field.Mr Uppal is one of the solicitors responsible for the firm's large section tackling child abuse.

He says as well as acting in the famous tribunal dealing with allegations of abuse in a north Wales children's home, Marron Dodds takes on several cases across the country.

The firm also has a sizeable medical negligence practice, and has recently been dealing with claims where patients with hip replacements complained that the replacement joints were driving themselves into their bones.

Another multi-party action taken on by the firms has involved the furore over mis-diagnosed smear tests.By contrast, Leicester-based Harvey Ingram Owston has followed the example of many large firms in the midlands, and has made commercial law its priority.

The companies it represents include Sketchleys, Vision Express and Everards Brewery.Stephen Woolfe, the managing partner of the firm, says: 'We don't just do takeovers and mergers -- we also deal with a lot of commercial property, commercial litigation and private client work.' He says the firm has also attracted praise for its repossession work for the Alliance & Leicester, and does a lot of housing association work both for the Leicester Housing Association and the De Montfort Housing Association.Edge & Ellison, which has a strong base in Birmingham, has also commandeered a presence in Leicester through its merger in 1989 with Staunton Townsend.David West, the partner in charge of the Leicester firm, says: 'Staunton Townsend was doing commercial work before we merged, but in a sense Edge & Ellison brought much more to the party.' He explains how through its corporate and commercial work, which involves companies such as Weetabix and Kingspark Developments, Edge & Ellison is working towards being the 'leading firm in the midlands'.

He adds: 'Although we have been in the east midlands for some time, during the past two to three years a lot of law firms have been attracted to this area, providing competition.

Some people say we're a victim of our own success.'Outside Birmingham, the west midlands has seen a lot of expansion in farming work during the past three years.

Goodger Auden, the largest firm in Burton-on-Trent, deals with agricultural clients on issues ranging from land ac quisition to disputes over the quality of slurry pits.Peter Scragg, senior partner of the firm, also talks about its commercial, criminal and family work, and about its strong personal injury section.In Stoke-on-Trent, Kent Jones and Done is flying the familiar flag of commercial law -- one of its large cases at the moment is an action against the coal authority, scheduled to proceed to trial this summer.