Falling demand for UK-made goods and a drop in output has caused the sharpest single-quarter fall in manufacturing confidence in 28 years, a survey says.
In the past three months, 16% of firms had seen a rise in new orders but 46% said they had fallen, the CBI's Industrial Trends survey said.
It also found orders for UK-made goods had declined at their fastest rate since 1999 as domestic demand fell.
The outlook for the economy has been hit by the global financial crisis.
In total, 60% of the 525 manufacturing firms which took part in the survey were less optimistic about the general business situation than three months prior.
The drop in new orders was largely due to weaker domestic demand, which recorded its sharpest fall since 1992.
The credit squeeze is also having a considerable effect on the prospects for manufacturers' businesses as they encounter greater lending problems.
Read the full story at BBC News BBC NEWS | Business | Factory gloom 'worst since 1980