BRITAIN'S manufacturing industry is "returning to health" with firms reporting two consecutive quarters of growth, a survey said yesterday.

The report, by the British Chambers of Commerce (BCC), said manufacturers had reported considerable gains in export sales and orders for the second consecutive quarter.

Export sales rose to plus seven per cent on the BCC's index in the second quarter of last year, calculated by subtracting those recording a fall from those showing a rise, from plus one per cent in the first quarter. Export orders rose from plus one per cent to plus five per cent.

After six quarters of continuous decline, manufacturing investment in equipment also jumped, rising ten percentage points to plus seven per cent.

But jobs in manufacturing continued to suffer, recording minus one per cent against minus three per cent last quarter, and future employment prospects remain unchanged from the previous quarter.

The services industry fared better, continuing its decade-long expansion with employment up from plus 12 per cent to plus 15 per cent while future prospects were also set to continue improving, the survey said.

David Frost, BCC acting director general, said: "The manufacturing recovery is not yet assured, although it appears to have strengthened somewhat since the last quarter.

"However, employers are continuing to lay off staff and we must remain cautious until the pick-up in recovery filters through into employment prospects."

The survey comes after figures earlier this month showed a large jump in manufacturing growth in May.

It was the first time the sector had expanded for two consecutive months since September-October 2000, according to the figures.

The BCC's report covered 7,155 firms, of which 2,418 were manufacturers and 4,737 were in the service sector.