PROFITS at local firms are being hit as the continuing strength of the pound takes its toll.

According to the latest corporate health check by information group Experian, profits fell sharply in the second half of the year among North West businesses.

"Throughout the last year the health check has highlighted productivity gains made across the economy," said Peter Brooker, of Experian.

"But with the effects of higher interest rates and the recent surge in the price of oil, profitability is now firmly in decline."

High wage inflation is also having a major impact, particularly in service industries.

"Most companies have held down prices and squeezed margins by driving down costs and raising productivity. Even so, Britain's productivity remains well below that of our competitors. Further heavy investment is needed to bring our productivity up to competitors' levels."