Exporters in Northern Ireland are bearing the brunt of a strong sterling, with the manufacturing sector hardest hit, according to a quarterly economic survey carried out by the Chamber of Commerce and Industry.

After strong export growth in recent quarters, manufacturers saw the rate of growth slip from plus 32 per cent in the first quarter of 1997 to minus 10 per cent in the second quarter. Firms of all sizes were affected.

Meanwhile, service sector firms experienced a 21 per cent decrease in export orders growth over the past three months.

Exporters agreed the strength of sterling against other EU and world currencies was putting them under pressure to cut costs. Mr Ian Thomson, marketing manager of F.G. Wilson in Larne, which produces diesel generators and exports over 90 per cent of its output, said there was no doubt the currency situation was having a serious effect on business.

He said the company was taking a number of measures to try to compensate for this. "We are having serious discussions with suppliers, who are also suffering because they are UK suppliers, to see how we can get costs reduced without quality suffering. We are looking for economies everywhere.

"In France and Germany in particular, we are under a lot of pressure on price, but it is having an effect worldwide.

"Business is not as good as we would have expected or wanted, but we are still reaching targets," said Mr Thomson.

Mr Martin McGuigan of AVX Ltd, Coleraine, Co Derry, an electronics components firm, said business had not dropped but described the strong pound as "a grave burden".

"It is hurting us. We export 65 per cent of our produce, mainly to Europe. Most of our competitors are located in Europe and with the way their currencies are at the moment, it puts them in a much more favourably competitive situation," he said.

Mr Peter Mallon is managing director of Mallon Group, which has its headquarters in Cookstown, Co Tyrone, but has also a sister company in Dundalk, Co Louth. He said the fortunes of the operations within the group showed clearly how the strength of sterling was hitting Northern companies while benefiting those in the Republic.

The Dundalk-based company, which develops geographical information systems, was now in a much stronger position to secure contracts from other EU countries, he said. "The sooner the euro comes in, the easier it will be to do business, as long as it doesn't bring other problems. But in principle it should take the uncertainty out of things," said Mr Mallon.

The retail sector, while being reasonably steady, has also been hit by the high value of sterling against the Irish pound because it has resulted in fewer visitors and shoppers crossing the Border from the Republic, according to the survey.

Mr John Stringer, chief executive of the Northern Ireland Chamber of Commerce and Industry, said: "There is the feeling that - even with a renewed ceasefire - retail activity, in terms of visitors from the Republic, will be reduced later in the year and in the run up to Christmas. Indeed a trend is now developing of more people from the North going South for shopping, holidays and weekend breaks."

However, Mr Stringer pointed out that, in general, employment in the manufacturing sector had increased in the quarter and that an increasing number of both manufacturing and service firms expected employment to increase in the second half of the year.

The Northern Ireland report is part of a wider British Chambers of Commerce quarterly economic survey. This quarter there were 116 returns from Northern companies.