THE North-South divide has widened in recent months and the manufacturing industry is on the verge of recession, according to an influential report published today.

Accountancy firm PriceWaterhouse Cooper says the strength of the pound has led to a sharp deceleration in manufacturing output with growth at its weakest in the North-East.

The findings have led to renewed calls for the Government to act to protect the region from the worst effects of the strength of the pound.

Mike Bird, chief executive of the North-East Chamber of Trade, said the Government needed to do something sooner, rather than later, to help the region's struggling manufacturing industry.

"Manufacturing is in difficulty all over the country, but because we have more of it, the effects are worst," he said.

"The Government needs to take measures that take into account the problems caused by the strength of the pound.

"It may be allowing us to buy things cheaper from abroad, but that doesn't keep people in this country employed."

But Mr Bird disagreed with the survey's finding that manufacturing is nearing recession, insisting problems in the region were not that bad.

The survey reveals that manufacturing output is expected to grow by just over one per cent this year, whereas the financial services sector should see growth of three to four per cent.

Rosemary Radcliffe, the firm's chief economist, said a period of weakness for the pound would help exporters get "back on their feet" and warned against the need for the Bank of England to raise interest rates.