Welsh industry is continuing to show clear signs of overcoming trading obstacles.

Businesses are climbing out of the downturn caused by high interest rates and the strong pound, according to an influential survey.

The Confederation of British Industry's Welsh Industrial Trends Survey reports that overall business confidence is at its highest for three-and-a-half years.

Export optimism is also recovering, showing its first improvement for three years.

However, firms are still worried that further interest rate rises could reverse the position.

The findings corroborate the recent Chambers of Commerce survey that also showed a steady renewal of confidence.

The CBI survey is in contrast to a separate report that showed Wales led the UK in business failures.

The number of failed businesses in Wales has risen by more than 26%, according to business analysts.

Worst slump

Wales showed the worst slump in the UK, according to Dun and Bradstreet, with 1,697 firms going under in 1999 - a rise of 26.1% on the figure for 1998 (1,346).

The East Midlands (24.8%), the East (19.3%) and North West (18%) were the next worst regions.

Total business failures in Wales during 1998 totalled 967 with the figure increasing in 1999 to 1,297.

Business bankruptcies also rose for the same period from 710 to 948, a rise of 34.9%, while liquidations also increased to 339, a rise of 31.9%

D&B senior analyst Philip Mellor said businesses in Wales and the rest of the UK were faced with very tight profit margins.