MANUFACTURING is growing in the North-East but rising costs are continuing to squeeze margins and cause concern within the sector, the Engineering Employers Federation (EEF) Northern said yesterday

According to the association's latest Economic Trends Report, due to be published on Monday, exports are up and there have been tentative signs of recovery in the eurozone, the UK's largest market.

However, Alison Valente, EEF's assistant director, said the North-East had shown a more negative balance on output than in previous quarters, which was a significant contrast from earlier this year when output and orders were growing rapidly.

"Manufacturing is still growing, however, rising costs are still affecting margins. Firms across most sectors continue to report little or no pricing power and the squeeze on margins has been compounded by rising costs," she said.

"The rising cost of energy has become the major concern for manufacturers not only in the North-East but throughout the UK. This is reflected in the very negative margins balances for energy intensive sectors, such as metals.

"Companies are not expecting much let-up in the situation in the next three months."

Figures released by the Chartered Institute of Purchasing and Supply yesterday showed that recent rate of growth in the sector had slowed.