STERLING has caught the biggest dose of flu since it was unceremoniously dumped by the European Exchange Rate Mechanism in 1992, triggering a fall in value against the American dollar from around $2 to $1.40.

But on Teesside, part of a region whose overseas order book this year has consistently outstripped the rest of the UK, a weakened pound isn’t all bad news.

That’s not to say, firms shouldn’t have the cold remedy ready. There are strategies they can adopt to cushion the worst shocks in currency fluctuation.

Earlier this year, sterling was hovering around $2 and America was a fashionable - and comparatively cheap - destination for retail bargain-hunters and connoisseurs of fine food and wine. Few Teessiders are looking to New York, Los Angeles or San Francisco now for their next holiday.

The punch-drunk pound is badly in need of a pick-me-up after losing one quarter of its value against the resurgent dollar since July. Nor is sterling faring much better against the other main currencies. Last month, it fell to an all-time low of 0.82p against the euro and since the turn of the year has lost a third of its value against the Japanese yen, which is good news for exporters but not so clever if you’re reliant on foreign-made components for production.

With Britain entering a potentially deep-rooted recession - the National Institute of Social and Economic Research predicts the economy could shrink by 1.5% next year - and with falling interest rates further devaluing the pound, some fear sterling is on the brink of total collapse.

One North East’s chief economist, Paul Mooney, says for it to recover, banks have to start lending more of the multi-billion pound rescue package fashioned by the Government.

He says: "We need to ensure that businesses have the means to grow and create jobs and wealth for the local economy. Unblocking the flow of credit to businesses should be a key priority for ministers."

But he adds that the pound’s demise has a silver lining, particularly for Tees Valley’s strong exporting base, which showed the strongest growth of any area of the country.

"The fall in sterling doesn’t tell the whole story. There is a big variation [in performance] across a range of sectors," says Mr Mooney.

"The region’s oil and gas, infrastructure and petrochemicals sectors are doing well."

Steve Guest, managing director of Wilton-based recruitment firm TechConsult UK, said continued worldwide demand for commodity goods would help these sectors ride sterling’s fall.

He says: "They have the ability to keep jobs flowing through the supply chain. Bio-products from oil can be used in the plastics industry, for example."

The UK is not the only economy suffering burns from the global financial meltdown - which spells optimism for a sterling recovery. If other countries start cutting their interest rates, the value of their currencies will fall and in doing so, push up the value of the pound.

Earlier this year, TechConsult won a £100,000 contract to supply up to 50 skilled offshore workers to Darlington sub-sea specialist CTC Marine Projects and Steve is hoping a revitalised home currency will help him win further UK contracts.

Further interest rate cuts could help it along the road to recovery.

James Rainbow, North-east-based divisional director and investment manager at Brewin Dolphin, believes it is "highly likely" that the current 3% rate will be lowered again in December.

But he says the Libor - the rate at which the banks lend to each other - "must follow suit" for the UK economy to feel the benefit.

He remains undecided on whether the measures announced in the Government’s pre-Budget report will help or hinder the pound but believes that "bold action had to be taken one way or another".

With the Chancellor’s plans sending public borrowing soaring to £100bn - ripping up the tried and tested policy of keeping debt to under 40% of GDP - there are fears that the sanctioning of ‘paper money’ will put a further squeeze on sterling.

In such an uncertain environment David Coppock, UK Trade & Investment’s international trade director for the North-east, says local firms could protect themselves against future currency fluctuations by fixing prices with suppliers.

"Businesses don’t like uncertainty," he says. "Hedging instruments allow businesses to buy in certainty and trade profitably."

That may be good advice as Jim Mann, a Darlington-based exporter and importer of paintball equipment, doubts that sterling’s slide will be arrested any time soon.

He says: "I’m sceptical that the Government’s measures will work. We are seeing the beginning of a new world order, with economies in the Far and Middle East becoming the economic powerhouses of the future," he says.

"The problems should have been nipped in the bud. Seven or eight months ago, companies were looking for big cuts in the base rate and it didn’t happen."

PAGE TWO: Paintball giant on the weakened pound.