The report says growth will be hit mainly via the export sector with Britain's worsening trade balance likely "to get worse before it gets better."

The Centre, part of the Institute for Manufacturing, says its gloomy predictions stem from the strength of sterling and the Asian economic crisis 'knock-on' effects.

Subsequently, the report says official growth forecasts may well not be met.

Earlier this month the Government issued a downgraded forecast for economic growth next year of 1 to 1.5%.

The Bank of England also downgraded its 1999 forecast to "around 1%" while the Confederation of British Industry revised its estimate to below 1%.

Export falls

Elaine Barnett, an economist at the Centre said more falls in exports were likely as a result of the lower growth prospects.

She said one of the more important indirect effects would see the US buying less from the UK as the Asian crisis causes economic slowdown on the other side of the Atlantic.

"This could have a more depressing effect on the UK's manufacturing export sector," Ms Barnett said.

Economy pounded

The report says the pound had appreciated 24% on a trade-weighted basis between January 1996 and September 1998 and has been a big factor in a worsening trade balance.

Although sterling has fallen back from its peak, the benefits will take some time to flow through, the report says.

"The Chancellor's pre-Budget statement implies that the UK government is expecting a significantly lower exchange rate next year, but the effect of time lags means that it will be some time before UK exports become more competitive," Ms Barnett said.