SHARP DECLINES in the number of new orders received by Northern Ireland firms, particularly from customers in the South, resulted in yet another slump in business levels last month.

New economic research from Ulster Bank suggests a weakening export market intensified a difficult trading environment for private sector companies in the North during May.

According to the latest Ulster Bank Purchasing Managers’ Index, the pace of contraction was at its highest level this year.

Meanwhile, an InterTrade Ireland survey of 1,000 business managers on both sides of the Border shows that nearly half of all businesses on the island are either contracting or in “survival mode”.

Weak consumer sentiment continues to prey on business performance, with seven out of 10 companies citing reduced consumer demand as a major concern, even where prices had been cut.

InterTrade Ireland’s director of strategy and policy Aidan Gough said companies that were diversifying into new products, services or markets were managing to avoid the malaise.

The slump in Northern Ireland recorded by the Ulster Bank PMI is in contrast to a pattern of continued growth across the UK economy.

Richard Ramsey, chief economist Northern Ireland, Ulster Bank, said it was recognised that the North needed to rebalance its economy and one key aspect of this involved a “step change” in export performance”.

Mr Ramsey said local firms in particular that are “over-reliant” on the South’s economy must “diversify their export base and urgently seek out new markets”.

A separate Ulster Bank PMI for the South’s construction sector showed that the decline in both activity and new orders accelerated in May for the third consecutive month.