Engineering businesses in the South East are among the top performers in the UK.

A survey by the Engineering Employers Federation South, which includes Sussex, indicates that the region's manufacturers are leading the way in output and new orders.

But there are indications that many firms are reluctant to make any significant investments in plant, training or technology.

Significantly, almost half of companies expect the improving economic climate to continue.

EEF chief executive David Seall said: "Overall, most of our member companies are benefiting from a relatively stable economy. Indeed, certain high tech sectors are clearly reaping the benefits of operating in a global knowledge-based industry.

"The latest figures show continuing improvement over the previous quarter with total output up and almost half of businesses expecting the volume of new orders to increase in the first three months of 2001.

"The only downside has been the slight fall in new export orders, although even this situation is much healthier than was the case six months ago."

The EEF survey also shows a quarter of businesses are reporting an increase in the number of people employed.

But Mr Seall added: "Our members continue to report that skill shortages remain a significant barrier to future growth and improved competitiveness."