MANUFACTURING in the UK is still suffering at the hands of the global economic slowdown.

That was the news from the Chartered Institute of Purchasing and Supply (CIPS), which said the sector was experiencing a "sustained contraction" of output, order books and employment.

Roy Ayliffe, director of professional practice at CIPS, added that purchasing managers were cutting back "to limit their firms' exposure to the deteriorating economic conditions in global markets and to cut costs".

The CIPS Purchasing Managers' Index (PMI) - a key barometer of the sector - measured 47.3 last month, compared with the 28-month low of 46.5 in May.

A figure of 50 or above indicates growth, while a figure below represents a contraction.

Although the June figures demonstrated month-on-month improvement, they were still well below the all-important 50 mark.

Simon Rubinsohn, chief economist at stockbrokers Gerrard, said the figures painted a gloomy picture.

He said: "Crucially, although the output component of the PMI climbed over the month, other important parts of the series continued to decline. These include both the new and export order components."

Mr Rubinsohn conceded, however, that there was some hope for the beleaguered sector, saying: "The only glimmer of light is the even more rapid decline in input prices, which suggests that profit margins may at last be beginning to stabilise."

Meanwhile, the North-East has topped the league for the highest rate of business failures in the UK.

According to the latest survey by information specialists Dunn and Bradstreet, the number of firms going bust in the region rose by 12 per cent in the past six months.

The continued squeeze on manufacturing saw 2,791 business failures in the region, accounting for more than 13.5 per cent of the total for the UK.

Of those failures, 909 were liquidations, an increase of 9.5 per cent, while bankruptcies rose by 13.6 per cent to 1,882.

Across the UK, the number of failures rose by 15 per cent, up to 10,804, as a result of the foot- and-mouth crisis and the slowdown in the manufacturing sector.

Despite the doom and gloom in the North-East, Dunn and Bradstreet said the total number of business failures in the UK was 0.5 per cent down on the same time last year.