HAMPSHIRE companies are shrugging off the shackles off a strong pound to rank at number two in a table of the country's most successful exporters.

Exports to Europe are particularly buoyant with 42 per cent of exporting companies from the region reporting a growth in sales to the continent.

A remarkable 15 per cent up on reports from as recently as six months ago, the region's performance lagged behind only the north-east.

In 2003, the total value of goods and services exported from the UK rose a half per cent to £187.8 billion and a booming world economy leads to high hopes for continued growth.

Hampshire companies excel in the industrial marine, defence and financial services sectors.

But against the bright European backdrop, exports to the rest of the world constitute a cloud on the horizon, with the number of companies reporting sales increases falling off by seven per cent.

But the strength of European trade means Hampshire companies joined others across the central south in a confident outlook, forecasting higher sales. Just under half expect the good times to continue in the coming six months, with a slight six per cent expecting a sales slide.

"These figures serve as a reminder that our businesses still have plenty of muscle when it comes to competing in continental markets," said Mark Handscomb, Southampton-based relationship director at Lloyds TSB Corporate. "The strength of sterling clearly isn't a handicap for our exporters who are benefiting from stronger global economic growth.

"However, they do need to keep a watchful eye on interest rates. Despite the proven resilience of

our companies, additional rises would push sterling higher and further squeeze exporters' profit margins."

While Hampshire companies are increasingly reliant on trade with their continental neighbours, they still have cold feet about dealing in the euro.

Only a quarter report that they are dealing exclusively in euros in EU countries, with 43 per cent issuing only sterling invoices. But, industry figures forecast that will change as pressure from European suppliers and customers increases.

The figures from Lloyds TSB Corporate compare 12 regions across the UK.