SLOW growth in orders has left businesses in the South East struggling to raise prices, according to the new Lloyds TSB Corporate Business in Britain survey. This has taken its toll on profits, with 40 per cent of firms reporting a decrease compared to 28 per cent which saw profits rise - 11 per cent worse than the national average.

Firms have been tackling internal costs but intensified competition from home and abroad has meant prices have remained static. This has also had a knock-on effect on cashflow problems, which are amongst the worst in the country.

Business confidence in the region for the next six months is the highest it has been for a year, although it remains the lowest in the country. The downward pressure on prices is expected to alleviate as more companies expect to be able to raise prices than cut them.

Richard Iwinski, south east area director for Lloyds TSB Corporate, said: "Businesses have tightened their belts over the last six months in an attempt to increase operational efficiency. In the medium term this should reduce production costs, boost profitability and stabilise cashflow pressures.

"Encouragingly, prices look set to start recovering and confidence is building although businesses will be thoughtful at present, in the light of recent stock market events. However, plans remain cautious and businesses should be careful not to over-commit themselves."