Birmingham and the West Midlands is at the forefront of an employment boom in the service industry.

The GMB union said more than 3.3 million jobs had been created in the sector since Labour came to power in 1997.

Just under a million jobs have been lost in manufacturing in the same period, the study suggested.

The West Midlands - along with the North-west, Southeast, London, Scotland, York-shire and Humberside - was a particular area for growth.

The union drew up a national league of areas with the highest number of new jobs since 1997, which was headed by Lancashire, Kent, Leeds, Staffordshire, Birmingham, Hampshire, Essex and Glasgow.

Birmingham has been at the centre of a surging growth in accountancy, legal and financial services.

But Paul Kenny, acting general secretary of the GMB, also hailed the Government's "impressive record of job creation".

The survey came as accountants BDO Stoy Hayward predicted accelerated growth for the economy this year, despite a "lagging" manufacturing sector.

The latest Business Trends Report reveals that the economy is set to grow by 2.2 per cent in the second quarter, followed by 3.4 per cent in the third.

This new-found confidence in the economy is likely to result in greater investment and expansion in UK businesses, fuelling bullish board-room activity, according to BDO Stoy Hayward.

Such levels of growth would increase Chancellor Gordon Brown's tax revenues and could bring to an end a period of more than a year of rising unemployment, especially if companies opt to lift the freezes on recruitment which many have imposed over the past year.

Despite expectations of a downward trend, BDO Stoy Hayward said it thought the Bank of England's Monetary Policy Committee would keep interest rates on hold for most of 2006.

However, a cut may be on the cards towards the end of the year if the recent US interest rate rises succeed in cooling world demand, it said.

With the weaknesses in the UK industrial base and an uncompetitive pound making it hard for some exporters to compete against European and American rivals, BDO said the manufacturing sector was still behind other sectors.

The manufacturing output index dropped by 0.9 points from 97.5 to 96.6 during the period. However, the group said its optimism index for manufacturing had jumped by 1.5 points from 97.1 in October to 98.6 last month.

It suggested this spurt reflected growing international and domestic d emand filtering through to this sector and contributing to the increasingly positive outlook for this spring.

Kim Rayment, partner in BDO Stoy Hayward's Birmingham business centre, said: "Taking the output and optimism indices together, the message is that 2006 should be a better year for the UK economy than 2005, with healthier consumer demand feeding through to most sectors.

"Risks remain, notably from the financial markets and from energy prices. However, we think that businesses may well feel confident enough in the next few months to dust off investment plans and increase hiring." ..SUPL: