SIGNS of shrinking profits and rising unemployment in Yorkshire are detected in two separate indicators announced today.

At worst the county could be hit by a recession and job losses next year, according to economic analysts Business Strategies.

The quarterly Experian Corporate Health Check also reports that the average profitability was already in steep decline months before the terrorist atrocities in the U.S. on September 11.

But the good news is that the way ahead for the region will be spearheaded by North Yorkshire up to the year 2006.

Meanwhile, average return on capital - Experian's leading measure of profitability - fell from 9.88 per cent in the 12 months to December 2000 to 9.01 per cent in the 12 months to March 2001 - the eighth consecutive quarterly decline, with profitability in Yorkshire falling by a third in two years.

Business Strategies stresses that a recession next year is a "worst case scenario", but in any case more job losses are on the way for the region.

It predicts that the number of people claiming benefit in the region will top 100,000 next year and rise further in 2003.

Rebecca Snow, economist for Business Strategies, said: "The unemployment figures are a reflection of the slump in manufacturing in the region, where traditional industries are heavily represented."

Factory output was expected to be down 1.8 per cent this year and 0.7 per cent next year before recovering in 2003 with growth of 1.7 per cent.

She said: "There is a great deal of uncertainty in the air. In the event of a downside scenario, the economy in Yorkshire and the Humber can be expected to contract by 0.1 per cent next year.

"Even in the more optimistic central forecast the region's economy is expected to grow at rates well below the UK average this year and next.

"Growth of 1.4 per cent is forecast for this year and 1.3 per cent next year compared with UK averages of 2.2 per cent this year and 1.7 per cent next year. By 2003 growth in the region at 2.4 per cent will be in line with the national average.

The Business Strategies reports show that over the next five years North Yorkshire will remain relatively buoyant with an average growth in its economy of 2.6 per cent being the highest in the region, with West Yorkshire (2.5 per cent), Humberside (two per cent) and South Yorkshire (1.8 per cent) trailing in its wake.