Overcrowding is still a major problem, the report said

But the report into Preston Prison says it has improved relationships between prisoners and staff, race relations practices and resettlement work.

The report by the Chief Inspector of Prisons, Anne Owers, criticised under-employment of inmates.

The management of suicidal prisoners and drug use were also attacked.

'Deserves breathing space'

A report by the Prison Reform Trust in August said the prison was the worst in the UK for overcrowding, with more than 90% of inmates sharing single cells.

Ms Owers said: "Preston's problems are common to many local prisons: historic, somewhat decrepit buildings, under-investment, a history of poor industrial relations, and an ever rising number of prisoners, many of them challenging and needy.

"It is commendable that Preston has nevertheless made some headway, and has a clear vision of what needs to be done to provide positive outcomes for its prisoners.

"It deserves some breathing space to achieve this; but that is what it is unlikely to get, given the current population crisis."

Phil Wheatley, director general of the Prison Service, said it suffered from problems normally associated with prisons built in the 19th century.

He added that healthcare would be fully staffed by the middle of January 2005, while many prison staff had been trained in mental health awareness and anti-drug and bullying procedures were being implemented.