A BUOYANT export industry is keeping manufacturers afloat in choppy economic waters, a leading business group has claimed.

EEF, which represents more than 100 manufacturers on Teesside, said healthy overseas trade was helping firms maintain growth.

The latest quarterly EEF survey showed investment in the sector was holding up well, with North-east firms taking on staff and reporting a rise in output. But it was not all plain sailing, with higher prices squeezing margins and firms finding it increasingly difficult to pass on cost rises to customers.

EEF said local manufacturers were generally weathering the storm well. Tony Sarginson, EEF North-east regional manager, said: “Typically a common and positive expression used by North-east manufacturing leaders is: ‘We are making hay while the sun shines’.

“Investment plans are holding up well and manufacturers remain optimistic for the future. However, as the economic outlook has become more uncertain, a divergence in views of recent trading conditions and future expectations has opened up.”

He added: “The balance between caution and optimism appears to be shifting for small companies looking at conditions over the next quarter, where visibility around future orders is keeping confidence in check.”

The findings showed that cashflow remained a key issue for firms as rising raw material prices ramped up production costs. High inflation is hurting businesses in several sectors, with the high street hit hard.

Clothing prices recorded their biggest increase on record, according to official figures out this week - heaping more pressure on cash-strapped retailers.

Earlier this week high street bellweather John Lewis posted an 18% drop in profits, with its Waitrose arm hit by the soaring cost of food products. Meanwhile, clothing chain Next said it had hiked average selling prices by 7% this year following large increases in cotton and oil prices.