The recovery of the economy is levelling off and remains fragile, according to a survey from the British Chambers of Commerce (BCC).

The survey, compiled during the last four weeks of 1999, suggests that the rate of sales growth of UK manufacturers is slowing.

Export orders have been particularly badly hit, recording their smallest gain since bottoming out a year ago.

The service sector, for months the driving force of the country's economy, is stumbling as well.

Sales are still growing, but domestic orders are down for the first time in a year, while export orders fell by 10 points compared with a quarter earlier.

The BCC blames rising interest rates and the strength of the pound for the tougher economic conditions.

Dr Ian Peters, the organisation's deputy director-general, said that business growth was losing momentum.

"There is clear evidence that a combination of interest rate rises and the strength of sterling is starting to bite", he said.

Repeating a familiar mantra of the business community, Dr Peters called on the Bank of England not to raise interest rates any further.

The survey of 8,630 firms suggests that both the manufacturing and service sector are finding export conditions "difficult".

Nonetheless, companies continue to invest, albeit at fairly low levels.

The BCC's survey questioned 3,356 manufacturers and 5,274 service sector firms. The sample included 149 large companies with more than 500 employees.