A STRONG pound has battered Yorkshire's manufacturers - and there is a danger to Britain if the county and the rest of the north remains unable to capitalise on a world market boom.

The warning comes from a University of York economics professor, who fears that export growth will fail to take up the slack if and when the Government runs into funding problems.

He is Prof Peter Spencer, chief adviser to the Ernst & Young ITEM Club.

With his help ITEM, which stands for Independent Treasury Economic Model, announced its winter forecast, showing the UK economy improving modestly throughout 2005, with expected GDP growth of 2.6 per cent,.

This, it predicts, will be driven principally by the public sector, and "hit a wall" in 2006 as the Government's funding problems culminate in tax rises in next year's Budget.

But the economic soothsayers fear that export growth will not come to Britain's rescue.

Manufacturers - particularly in the North - have failed to capitalise on a world market boom, in spite of its greater dependence on the sector than the south, states the report.

Despite a relatively strong global economy over the last three years, with even laggards like Japan benefiting from the boom, UK manufacturers "have been noticeable by their absence at the party".

UK exports of goods only increased by 4.4 per cent in the year to September 2004 and, on a regional basis, only two per cent in the north, while world trade grew by 11.6 per cent.

Professor Spencer said: "These numbers reflect a major loss of market share for northern exporters.

"It is simply a case of lack of capacity preventing manufacturers in the region from exploiting the strong export markets available. Off-shoring, plant closures and falling investment spending have reduced their ability to supply these markets."

Prof Spencer said: "There has been a woeful neglect of the pound in policy circles since 1997. The Monetary Policy Committee has intervened successfully on other occasions - for instance last year, to cool house price inflation - and a similar intervention should have been made to ease the strength of sterling."

Updated: 11:44 Wednesday, January 26, 2005