THE ailing US economy cast further gloom over the North-East yesterday.

Chemicals and paint giant ICI reported a six per cent fall in first quarter pre-tax profits.

The group described trading conditions as "challenging" as profits before tax and exceptionals for the opening three months of the year slipped to £85m from £90m a year earlier.

ICI said growth in its European, Asian and Latin American markets had helped offset problems in the US, where sales slipped by two per cent during the quarter.

ICI once employed more than 30,000 people on Teesside but more than a decade of disposals and cost cutting has seen that figure reduced to little more than 1,000 today.

Group turnover rose to £1.64bn from the £1.52bn recorded in the equivalent quarter of 2000.

Charles Miller Smith, ICI chairman, described the results as a "robust sales and profit performance", which demonstrated the resilience of the business.

He added: "We are encouraged by the competitive performance of the business in the first quarter."

Last year, the group completed a massive three-year transformation programme, repositioning itself from a high-volume bulk chemicals business to a speciality products and paints business.

The paints operation, which includes Dulux, made a steady start to the year, with sales ahead by one per cent and profits improving by three per cent.

In Europe, sales in the sector declined by three per cent after heavy promotional campaigns by UK retailers had boosted the figures for 2000.

Poor weather also hampered the performance of exterior products, ICI added.

The group's starch business failed to match the strong showing at the start of the previous year as trading profit slipped 19 per cent.

Raw material costs and the slowdown in the US economy were also blamed, although the figure was still higher than the previous three months.

The Quest fragrances and speciality products businesses both improved trading profits by about eight per cent.