Factory bosses are preparing a cut in production in the new year after the eurozone crisis left exports at their weakest in two years, the CBI said today.
The lobby group's industrial trends survey found 32% of manufacturers expected to reduce output over the next three months, compared to 24% of firms who believe that production will rise in the quarter.
The downturn comes amid weakened export order books, with 44% of firms reporting them below normal and contributing to the worst month for business with overseas customers in nearly two years.
CBI chief economic adviser Ian McCafferty said: "The weaker export performance no doubt reflects ongoing instability in the euro area, our biggest export market, and its knock-on impact on prospects for the real economy."
Out of 434 responses, the CBI said 18% of firms reported that total order books were above normal, compared with 41% that were below. The resulting balance of minus 23% was the lowest since October 2010, it added.
Samuel Tombs, UK economist at Capital Economics, said the figures suggested output was continuing to contract at a brisk pace, raising the chances that the sector will help drag the overall economy back into recession.
Howard Archer, chief economist at IHS Global Insight, added: "The latest manufacturing survey evidence and hard data have been hugely disappointing overall, and it looks highly likely that industrial production will contract appreciably in the fourth quarter."