The profit margins of Northern Ireland companies are under threat from price pressures. and this is prompting fears that the North's economy could be hit by a major reduction in spending, business advisers PricewaterhouseCoopers have warned.

The firm believes companies in the North who have relinquished profits to retain market share could now see the impact of reduced margins on their retained profits.

According to the Bank of England's latest quarterly inflation report, the British economy is slowing and economic growth is not expected to rise above 2 per cent over the next two years.

The Bank of England last week cut interest rates by a quarter point to 5 per cent because of the global downturn in world markets which it believes may become more prolonged.

Mr Stephen Kingon, senior partner of PricewaterhouseCoopers in Belfast believes the Northern Ireland economy will face the same challenges identified by the Bank of England iregarding slowing economic growth.

He said that already many companies in the North may not be able to reinvest in their businesses next year because they have had to trim prices and profitability to retain customers.

"The issue facing Northern Ireland more than any other region is capital funding. A significant number of companies fund their business through short-term borrowings and overdrafts and if profits fall the ability to trade out of difficulties can be severely constrained.

"In the short term tight margins and reduced profitability could mean that the retained earnings necessary to fund expansion may not be there," Mr Kingon warned.

He believes that this ceiling on investment could have a domino effect on the Northern Ireland economy.

The Bank of England yesterday voice its concern in its quarterly Inflation Report that falling profits across the United Kingdom generally could accelerate an economic slowdown.