Business confidence among manufacturers is falling at the fastest rate for 18 months.

In its quarterly survey of industrial trends the Confederation of British Industry (CBI) said both business confidence and the optimism for exports were plummeting.

A total of 21 per cent of manufacturers were less optimistic than four months ago, and only 11 per cent more confident.

Total domestic and export orders fell at the their sharpest rate since July last year.

Manufacturers expected orders to keep on falling over the next four months, with expectations at their lowest since January 1999, said the CBI.

Manufacturing output also fell at its fastest rate for a year, but manufacturers said they expected output to rise over the next four months.

The number of jobs being cut was relatively stable in the period and, while businesses said they expected to continue cutting jobs in the next four months, the rate would be less rapid than during the first half of the year.

Nick Reilly, chairman and managing director of Vauxhall Motors and head of the CBI's economic affairs committee, said: "Manufacturing is faltering and risks slipping back into a downturn.

"Orders, output and confidence have all fallen for the second survey in a row. UK companies have no real respite from the strength of sterling against the euro which has made it more difficult to compete abroad and at home."

He urged the Bank of England's Monetary Policy Committee to keep rates on hold at six per cent when it meets again next month and to signal that rates will in future come down.

In contrast to the CBI's findings, earlier this week, a survey by the Institute of Directors said export orders were at their strongest level for three-and-a-half years.