CASHFLOW remains a major headache for North-East firms as business confidence in the region continues at a low ebb, new research has shown.

The UK Business Confidence Monitor (BCM) from the Institute of Chartered Accountants in England and Wales (ICAEW) shows the North-East is the least optimistic in the country about prospects for the next 12 months.

Although the region’s business confidence improved slightly in the second quarter of 2009 from -42 to -38.8 on the BCM index, this was the smallest rise in the country and remains well below the UK average of -28.2.

Cash flow is one of the biggest concerns among North-East firms, with 39 per cent of ICAEW members in the region now citing late payment from customers as a greater challenge to business performance, compared to just 11 per cent a year ago.

Keith Proudfoot, ICAEW regional director, said: “It is difficult to pinpoint exactly why the North-East is lagging behind, while business confidence in the rest of the country is showing a more positive trend.

“Rebuilding confidence is an important step in the economic recovery, though clearly for many of the region’s businesses there is still little to be positive about.”

Senior North-East business professionals are forecasting no growth at all in profits over the next 12 months, compared to a modest 0.3 per cent rise nationally.

Mr Proudfoot said it seemed that the tough decisions had already been taken as the region’s firms expect staff numbers to fall by 0.7 per cent, closely in line with the national average.

Long-term plans are also on hold with regional capital investment forecast to fall by 0.1 per cent in the year ahead.

This is compared to the national decrease of 0.9 per cent, while research and development spending will also be down by 0.2 per cent in the North-East, contrasting with a UK average rise of 0.5 per cent.