THE North-East was last night facing up to the grim prospect of thousands more job losses as the manufacturing sector slipped into recession.

Union leaders warned that up to 10,000 jobs could be axed over the next 12 months.

Government figures show that manufacturing output fell for the second quarter in a row nationwide, formally triggering a recession.

And with the North-East more heavily dependent on manufacturing for its economic prosperity than any other part of England and Wales, the outlook is bleak.

Union and business leaders in the North-East reacted by calling for a series of urgent Government measures to pull manufacturing back from the brink.

Over the past year, 5,300 manufacturing posts have been axed in the region, with steelmaker Corus and shipbuilder Cammell Laird among those worst hit. The sector has been badly hit by the strong pound and the global economic slowdown.

Last night, Paul Nowak, regional secretary of the TUC, said he feared that at least 10,000 manufacturing jobs in the region could go in the next year with many more across the country.

Mr Nowak announced that the union, together with One North East, the North-East regional assembly and employers federations such as the CBI, would be holding a "manufacturing summit".

The conference, planned for November, will try to map out a future for the North-East manufacturing sector.

Mr Nowak said: "We need help now. We don't want to wait until people are being issued with P45s and redundancy notices.

"We believe there is a future for manufacturing in the North-East but we need to see much more investment in industrial development and job skills.

"Money and assistance needs to be made available earlier in the cycle by the Government for a lot of manufacturing firms which are experiencing difficulties and facing closure."

The TUC has called for an extra £1bn of regional industrial development aid, because problems are worse in areas such as the North-East.

Angus Hynd, regional director of the CBI in the North-East, said: "Manufacturing is technically in a recession and we are expecting further job losses - we are at the bottom of the trough.

"Some manufacturers are performing well, but the overall picture is bleak and we need financial assistance."

Mr Hynd said that more cuts in interest rates - following last week's quarter per cent cut - might be needed to further relieve the pressure on manufacturers.

The North East Chamber of Commerce also said another interest rate cut might be needed, but called for careful planning, warning against "economic panic".

About 170,000 people are employed in manufacturing in the North-East, which accounts for 29.3 per cent of GDP per head.

Gerry Hunter, regional officer with the Amalgamated Electrical and Engineering Union, said: "Industry does not carry any fat any more and most companies are already at the bone. The effects of a recession will be immediate and we can only hope that it will be short-term."

The slide coincides with a shopping boom on the high street, showing more evidence of a widening gulf in the economy between the manufacturing and service sectors.

Figures from the British Retail Consortium and KPMG last night show total sales in July lifted 8.4 per cent on the same month a year earlier.

A spokesman for Prime Minister Tony Blair, whose Sedgefield constituency has been hit by job cuts including 300 recently at Sanyo, said: "We recognise that manufacturing has faced a difficult time. But the measures which we have put in place to provide a stable economic platform make us able to cope better than in the past."