The study, by the independent economic thinktank Business Strategies, suggests that East and West Sussex along with the rest of the South East outside London will outperform all other regions in the UK during 1999.

Output will be up by two per cent, compared with the national average of 0.8 per cent.

Richard Tyldsley, Business Strategies' senior economist, said: "The region's success is rooted in the balance of its industries.

"It is heavily biased towards services, particuarly business services and communications, which can again expect robust demand."

However, the pace of activity is expected to slow over the year, followed by a surge during 2000.

Mr Tyldsley said: "Financial and business services will again spearhead growth, driven by the need for information technology up-grading, technological change and outsourcing."

The weakest service sector growth will be in distribution, hotels and catering which will be held back by the weakness of domestic demand and the impact of manufacturing recession on wholesaling businesses.

"The South East has been less affected by the strength of the pound because its mix of firms includes companies in the hi-tech and high value-added industries, such as aerospace and electronics, which have proved to be less price-sensitive," said Mr Tyldsley.

Financial and business services is expected to be the only sector where jobs will be created during the remainder of 1999.

Unemployment in the South East is expected to rise by 9,000 this year to 188,000 and to 213,000 next year.

In the latest edition of the Lloyds TSB Economic Bulletin the bank's senior economist Trevor William writes: "Manufacturing will remain in recession this year but gradually recover to show faster growth in 2000 and above trend growth in 2001."

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