CONFLICT in Iraq has further hit Britain's ailing manufacturing sector, it emerged yesterday.

The Chartered Institute of Purchasing and Supply's (CIPS) monthly purchasing managers' index shows that manufacturing orders nationally fell at their steepest rate for one-and-a-half years in March.

It marked the fourth consecutive month of decline for the sector nationally.

The index, which measures rises and declines in manufacturing output as figures above or below 50, fell from 48.1 to 46.1 between February and March.

According to the CIPS, this "signalled the contraction of the UK manufacturing economy at a significant and increased pace".

Roy Aycliffe, director of professional practice at CIPS, said: "This war has come at a very bad time for the manufacturing industry.

"New orders took a bad hit last month, with firms clearly very reluctant to commit to new business with the current instability of the geo-political situation."

The findings were greeted with particular concern in the North-East, which is proportionally the UK's largest exporter of manufactured goods.

The sector accounts for 20 per cent of the region's economic output, and 175,000 jobs.

John Irwin, president of the North-East Chamber of Commerce, said: "North-East manufacturers have been experiencing problems for the last couple of years, so the latest figures are not too surprising, although they do record a worrying increase in the pace at which output is slowing.

"The start of military action in the Gulf has compounded pre-war fears, with many contracts now being put on hold as more companies adopt a 'wait and see' policy towards their business activities.

"With confidence and orders already falling, a prolonged conflict in the Middle East could see a further decline in production over the coming months."

According to a chamber survey, the war-induced decline extends to other sectors, notably the region's petroleum, oil and tourism industries.

It found that marketing and service companies feared that they would suffer from the knock-on effects.

A spokesman for One NorthEast said: "Of course, the CIPS report is of concern, but One NorthEast will continue to work with the industry to boost manufacturing projects across the North-East.