THESE are "testing times" for businesses in the North West according to a new survey.

Research by the North West Chambers of Commerce in conjunction with the Royal Bank of Scotland reveals sales and orders in the region's service sector fell sharply during the second quarter of 2001.

The foot and mouth epidemic is seen as a major factor.

Mr Ged Keary, RBS managing director of corporate and commercial banking for the North West, said: "Last quarter's results suggested we should expect the effects of FMD to further reveal themselves throughout the year.

"While we are undergoing weakening global conditions, the North West service sector is experiencing a sharp deterioration that is neither in line with national trends nor mirrored in most other UK regions.

"This indicates the North West is enduring testing times."

Decline

The survey found that sales and orders in the manufacturing sector continue to decline.

Although performance in the domestic market was slightly less negative, export sales and orders continued to weaken -- compounded by the strong pound.

In line with the rest of the country, North West businesses are continuing to have problems recruiting suitable staff with 61 per cent of manufacturers and 72 per cent of service sector respondents saying they were experiencing difficulties.

Manufacturers, in particular, were having problems recruiting manual labour.

But 23 per cent of manufacturers and 26 per cent of service sector respondents said they expected to recruit in the next quarter.

Mr Sam Jones, Chairman of the North West Chambers Economic Committee, said: "Even before FMD the rural economy was in a poor state.

"The damage done to the rural tourist industry by FMD has added hugely to the problem.

Diverse

But he added: "Fortunately for the North West its service sector is diverse and the region's strengths in, for example, the biotechnology and ICT sectors, will reduce the impact of the overall adverse service sector trends indicated by the survey."

Mr Jones was adamant that the North West's graduate retention rate has to improve.

The North West Tourist Board says industry in the region is being threatened because there are not enough staff to fill vacancies, the people who do apply do not have the right skills and there is a lack of suitable training to develop existing staff.

NWTB, the Cumbria Tourist Board and the North West Development Agency have now launched the North West Tourism Skills and Employment Network to tackle the crisis.