FIRMS in the North-East have been forced to reduce prices over the last six months, leading to a fall in profits, it was claimed yesterday.

The Business in Britain survey from Lloyds TSB Corporate claims the downturn in the US and global slump during the final quarters of the last year is still having an impact on firms in the region.

It said that severe downward pressure on prices has forced more firms to cut prices than raise them.

Profits in the North-East have now fallen continuously for the last four years, primarily because of this ever pressing need to cut prices.

Despite this, says the survey, businesses in the area are more confident than their neighbours in Yorkshire and only slightly less confident than the national average.

The survey's confidence index, which charts expectations for sales, orders and profitability for the coming six months, shows that the region's confidence as a business community has jumped up by ten points to 26.

Yorkshire scored 25, compared with the national figure of 27.

Sandy Sanderson, area director for Lloyds TSB Corporate in the North-East, said: "In a very testing environment firms are concentrating energies on becoming ever more efficient and stream-lined, with more than two-thirds, 67 per cent, hoping to keep prices steady in the run up to Christmas.

"Vigilance continues in the cash management arena where North-East businesses have maintained an impressive downward trend.

"Just 21 per cent of companies now declare cashflow problems, down from 24 per cent six months ago and 32 per cent a year ago."

He added: "Interestingly, an upwards trend is visible when you look at the number of firms who expect to be able to increase investment in the next six months - 30 per cent as opposed to just a fifth of companies six months ago.

"Similarly, employment is an area where there appears to be sunshine after the rain with around five per cent more companies reporting the ability to recruit than six months ago."