Business confidence among Northern Ireland's small firms is at its lowest point for six years, according to the latest study from the Northern Ireland Economic Research Centre (NIERC) and the University of Ulster Business School.

The survey found that profits in around half the manufacturing companies surveyed had fallen this year as a result of the strength of sterling. Cash flow problems, late payments, high interest rates, and increased competition from bigger firms were also given as reasons for the decline in optimism among small and medium-sized enterprises.

The study involved a survey of 400 small firms, all with fewer than 100 employees. They included 187 from the manufacturing sector, and 213 in the services industry.

Among the principal findings were that 29 per cent had been forced to reduce their prices to customers in the Republic because of the high level of sterling against the pound, and 24 per cent of manufacturing firms had succeeded in reducing costs by buying in more raw materials from overseas. Nevertheless, 27 per cent succeeded in winning new orders, although 11 per cent of manufacturers were forced to cut back on their workforces following a loss of orders resulting from the strength of the British pound.

NIERC analyst Dr Stephen Roper said that growth in the British and Northern Ireland economies was expected to slow over the next 12 months and, as a result, the problems being faced by small companies were likely to increase. However, he said that in the short term, the downward movement of interest rates was likely to provide some relief for local businesses.