Despite recent goods news for other parts of the economy, small and medium manufacturers are much less optimistic than their larger competitors, the CBI said.
The survey by the CBI and accountants Pannell Kerr Forster found that business optimism among small and medium firms had fallen for the fourth consecutive quarter even though confidence among UK manufacturers as a whole was found recently to have increased for the first time since April 1995.
Tony Bonner, chairman of the CBI's smaller and medium firms council, said the employers' survey painted a gloomy picture of firms lagging behind on output and new orders. Their performance is the worst since January 1993.
Very small businesses across many sectors have seen no improvement at all, according to Ian Peters, head of small business services at NatWest.
In an interview with the Independent he singled out the very smallest retailers, one of the biggest groups of businesses by number, as among those with the worst problems. He said: "The small retailer is undoubtedly having a tough time at the moment."
Mr Peters said small firms generally were lagging the rest because the recovery had been led by manufacturing exports, not consumer buying, and spending had been restrained.
The rise in out-of-town shopping was also working against small high street firms, and recent surveys showed that the number of retailers citing supermarket competition as a serious constraint on sales has risen from tenth to fifth biggest concern. Small retailers have also been hit unfairly hard by the uniform business rate.
Separately, civil engineering firms are becoming increasingly concerned about the "worsening condition" of the market for their services because of cuts in public spending
A survey by the Federation of Civil Engineering Contractors predicted further cuts in workload over the next year.
But confidence among marketing professionals is the highest for a year, providing evidence that the economy will recover without fuelling inflation, according to the Chartered Institute of Marketing.
Marketing managers are planning for a 6.8 per cent sales growth this year, but they expect the inflationary element to be 0.9 per cent. Professor Douglas McWilliams, the institute's economic adviser, said: "The economy is bouncing back after a sluggish period in the early part of the year."