Strong sterling is leaving Northern Ireland companies increasingly vulnerable to increased competition in both the import and export markets, according to a report published by the accountants and management consultants Coopers & Lybrand.

The company says that the chances of the UK economy as a whole experiencing zero growth next year has increased dramatically over the past six months. The report says that, while business services and telecommunications are doing well, retailers are having mixed fortunes, while manufacturing exporters are now close to recession. In Northern Ireland, the performance of local exporting companies was said to be "slowing alarmingly".

The report claims that the "hard landing" could be seen as a milder version of the recession at the start of the 1980s, when an over-valued British pound and tight monetary and fiscal policy resulted in a dramatic slowdown in economic growth.

"In the light of today's uncertainties," the report says, "the evolution of the economy over the next six to 12 months will need to be watched particularly carefully by policy makers and business alike for the possible early warning signals of a hard landing. It should not be assumed that the recent buoyant economic performance will be maintained in 1999 and 2000."

But according to the First Trust Bank's latest economic and business review, such talk is premature. The report, compiled by analysts from First Trust and the University of Ulster, says consumer demand is likely to remain high, and that reliance on the British market would reduce the effects of the strong pound.

While there was no doubt that the strength of sterling had dealt a severe blow to the competitiveness of exports, the North's dependence on the British market could work to its advantage, with domestic demand remaining buoyant into next year.