ENGINEERING services group Weir has cited "difficult market conditions" for a downturn in earnings from its UK operations.

The company, which owns Darchem Engineering at Stillington, near Darlington, said its good overseas performance was undermined by "sluggish order input" since the second half of 1999 for both products and services.

It added there had been a lack of investment by its customers in the oil, power and water sectors.

However, the group said these under-performing sectors were now showing signs of recovery.

Darchem Engineering's aerospace and high performance car markets continued to be strong, helping to balance the ongoing weakness in the petrochemical and general engineering sectors.

John Menzies, managing director of Darchem, which employs 560, said: "Operating results continue to be very satisfactory. The outlook for the rest of the year is good, helped by a much better recent order intake for metallic insulation."

Darchem has been boosted by winning a £5m contract to supply high-tech insulation for the engine rooms of the new Royal Navy "Astute" class nuclear submarines, being built at BAE Systems in Barrow.

Mr Menzies said: "This work will help to maintain employment at Stillington over the next four years."

New business was also won on the next generation of gas turbine powered fast ferries and luxury yachts.

Darchem's heat treatment activities are also expanding. EHT North has established a leading position in the surface hardening of car valves through its new purpose built plant at Stillington.

Weir's pre-tax profits for the six months to June 30 came in at £21.8m compared with £27.8m a year earlier.