BUSINESSES in the region are the most pessimistic in the country about their prospects for the remainder of the year.

Figures released today show that the North-East is the only region in England and Scotland to be pessimistic about the overall business outlook for the next six months.

The regional survey of UK economic trends found that North-East companies have been feeling the pinch during the past year, with little change in prices and a significant fall in profit margins.

Employment is also down, with large numbers of redundancies arising from high-profile closures such as Stag Furniture, in Sunderland, and companies restructuring, including Elementis Chromium, in Eaglescliffe.

Eighty-six per cent of businesses in the region are feeling the pressure of rising energy prices, according to the survey.

Companies in the North-East are also concerned about the region's poor road and rail infrastructure, while some are becoming less willing to invest.

Sarah Green, regional director of the Confederation of British Industry (CBI), said: "Transport and skills are the key areas holding back businesses within the region, and CBI North-East will be working at a national level to lobby for more flexibility, both in funding and on policy interpretation, to ensure that Government guidelines do not inhibit growth within our region.

"My greatest concern from this survey is the lack of optimism regarding investment prospects.

"If businesses do not continue to invest for their future, it will be very difficult for them or the regional economy to succeed."

However, Ms Green said the report, commissioned by regional development agency One NorthEast and the CBI, is not all gloom.

Businesses in the region and the North-West are more likely than any other to belong to industrial networks, while the North-East is second only to the West Midlands in its research and development links between business and universities.

There are also expectations of an increase in business output over the next year, and the region makes good use of its ports and airports.

Alan Clarke, of One NorthEast, said the agency was working hard with business to tackle rising energy costs and investment problems through a range of programmes, including the North-East Productivity Alliance and the Carbon Trust.

In the past year, One NorthEast has given £16m in Selected Finance for Investment grants to help 130 business across the region to grow.