The warning coincided with the announcement of substantial job cuts from three more manufacturers.
And Ministers were braced for further job losses' in today's unemployment figures prompting Labour MPs, industrialists and trade unions to appeal for a U-turn to reduce interest rates and rescue manufacturing from recession.
BOC, the industrial gases group, said yesterday that it would cut 500 UK jobs, with the South-east bearing the brunt of the losses; Royal Ordnance announced that almost 200 jobs would go at its weapons plant in Nottingham; and Molins, which makes spare parts for cigarette machines, said that it would cut 260 jobs in Peterborough.
The Confederation of British Industry (CBI) predicted more job losses, and said manufacturers up and down the country were reporting falling orders and business optimism. The CBI estimated that UK employment fell by 11,000 in the second quarter of the year, and forecast that another 16,000 jobs will go in the third quarter.
Sudhir Junankar, CBI associate director of economic research, said: "The regional survey shows the picture for manufacturing is tough across the entire country.
"The strength of the pound coupled with the downturn in domestic demand is having a major effect on UK manufacturing."
For the first time since the last recession, manufacturers' orders declined in every region of the UK in the four months to July and orders are forecast to fall further over the next four months.
Manufacturers throughout the UK are gloomy about economic prospects, the one exception being Northern Ireland, where the peace process has injected a degree of optimism.
Dr Neil Blake, research director of Business Strategies, the consultancy which, together with the CBI, conducts the quarterly regional trends survey, said: "This is a marked turning point for many manufacturers with a double blow from domestic demand and export orders.
"Business confidence is low and our estimates suggest that employment levels are already beginning to take the strain in a number of regions."
However, the CBI stopped short of forecasting outright recession. Mr Junankar said: "We are expecting a sharp slowdown but we are not in the same position as the recession of the early 1990s."
Most City experts are agreed that there is still only a small chance of a recession in the UK, largely because the services sector - which represents around 80 per cent of the economy - is still growing strongly.
BOC, Royal Ordnance and Molins yesterday became the latest in a string of manufacturers to cut UK jobs. On Monday, Grove Worldwide, a US crane maker, said it was closing its Sunderland plant with the loss of 670 jobs. Last month, Rover, the car maker, said it was cutting 1,500 jobs and Siemens, the electronics giant, said it was closing its Tyneside plant, with the loss of 1,100 jobs.
John Prescott, the Deputy Prime Minister, blamed yesterday's announcements on world economic problems as well as the high pound. He angrily rejected a suggestion that the Government saw job losses as a necessary price to pay for fulfilling its long-term economic goals.
Ministers blamed world economic troubles and the Asian crisis for the turnaround in manufacturing. Stephen Byers, the Chief Secretary to the Treasury, said he hoped industry would realise it was "not being let down" by the Government.
But John Redwood, Tory trade and industry spokesman, said: "The CBI's manufacturing survey shows that manufacturing is collapsing fast. Peter Mandelson [Secretary of State for Trade and Industry] is becoming the minister for manufacturing collapse."
To date, the industrial heartlands of the Midlands and the North have borne the brunt of the UK's economic slowdown. The CBI's regional trends survey has been recording falling manufacturing orders in the North-west and in Yorkshire and Humberside since the middle of last year, and the North-east has, to date, suffered disproportionately from heavy manufacturing job cuts.
However, yesterday's survey suggest that the slowdown is spreading throughout the country. According to the CBI, total manufacturing orders in the South- east fell in the second quarter of the year for the first time in five years, while in the South-west the total of new manufacturing orders suffered the greatest fall that it has ever recorded in the quarterly regional survey.
A net balance of 43 per cent of manufacturers in the South-east are now pessimistic about the economic outlook, while in the South-west 57 per cent are gloomy, the CBI said.
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