NORTHERN IRELAND firms are fighting a losing battle against the knock-on effects of public sector cuts at home and the collapse of the economy in the South, according to new research today.

Companies in the North have reported a dismal start to 2011 as a lack of new business and rising costs put further pressure on private-sector firms struggling to stay afloat in deep recessionary waters.

According to new research published today by Ulster Bank, business activity in Northern Ireland fell at a “substantial” rate again last month. The bank’s latest purchasing managers’ index (PMI) report shows the North was the only part of the UK where firms continued to report falling levels of business activity and new orders in January.

As a consequence, lack of new business coming through forced many private-sector firms to make further redundancies last month.

According to the PMI report, January was the 33rd month in a row where private-sector companies shed jobs.

Unsurprisingly, construction and retail companies have faced the brunt of the job losses, while manufacturing firms appear to have shown a greater resilience to the local economic downturn.

Richard Ramsey, Ulster Bank’s chief economist in Northern Ireland, said there are some indications that the overall pace of decline in private-sector output and new business has eased.

But Mr Ramsey said it was also clear there is still a “divergence” with the rest of the UK, where companies there posted a “significant rebound in output and new orders” last month.

He said this highlights the underlying weaknesses in the North’s economy.

“The growing disparity is most evident with the new orders index, with the differential between Northern Ireland and the UK now at its widest margin since the survey began.

“The greater exposure of local firms both to the Republic of Ireland and the public-sector cuts, relative to their counterparts within the UK, are key explanatory factors behind this trend.”