BUSINESSES across the region are being warned of a predicted slow down in the economy in the next few months.

That could lead to firms closing or having to lay-off workers, said Bill Midgley, vice-chairman of the North East Regional Assembly.

National research by the Institute of Directors (IoD) shows that company profits were weaker in the second quarter of the year and that business conditions deteriorated.

Mr Midgley said he believes it will result in many firms having to make cut-backs, with some going to the wall.

"This is very real and the impact on the North-East is going to be very big with a number of job losses," he said.

"We are already seeing a slow-down in manufacturing companies across the region and as that takes hold it will spread to service industries, with people having less money to spend.

"Exporters will find it particularly difficult, especially with the American recession. I do not think the outlook looks particularly good."

The IoD research found that, while business optimism was stable, the manufacturing sector continued to under-perform compared with other industries.

Ruth Lea, IoD head of policy, said: "Both total and export orders were down, as were profits and growth expectations, and job creation was weaker. The overall picture is one of a still growing economy, but a slowing one."

Figures released by HM Customs and Excise show that the North-East is the region with the highest percentage of exports to the European Union.

The 76 per cent of goods exported, up to March this year, were worth £5,275m and independent research has shown that 141,561 jobs in the North-East depend on these exports.