Britain's manufacturing firms remain stuck in the doldrums, according to the Engineering Employers' Federation (EEF).

Engineering output and orders have now been shrinking for a year and a half, according to an EEF survey of 1,200 firms.

"Renewed weakness in the world economy and in business confidence has stopped the recovery in UK manufacturing in its tracks," said Stephen Radley, chief economist to the EEF.

"A wobble in world trade and a fall in business confidence have translated into weaker orders... investment plans have been scaled back at a faster rate than before," he said.

Profits squeeze

And he urged the Bank of England to cut interest rates when it meets this week.

The EEF said the engineering industry was in decline in all regions of Britain.

Profit margins were being squeezed, leading firms to cut back their investment plans and cut back jobs at a faster rate during June, July and August than in the previous three months, the survey said.

Only cars makers have escaped falls in output, helped by demand for exports as well as a healthy domestic market.

The EEF said Britain's manufacturing output has fallen by 8% since the end of 2000, while engineering output was down 16%.

Appeal for help

"With overall growth slowing and inflation under control, the Bank of England has the room to reduce interest rates.

"A quarter-point cut on Thursday would help to prevent the recovery weakening further," Mr Radley said.

The Federation's findings come a day after another closely-watched survey painted a brighter picture of UK manufacturing.

Manufacturing output expanded at its best rate since May, according to a report by the Chartered Institute of Purchasing and Supply (CIPS).

The sector suffered its biggest monthly drop in 23 years in June, hit by a combination of the World Cup and the Queen's Jubilee holiday.

Economists expect the Bank of England's rate setting committee to leave rates unchanged for the tenth month in row at the end of its meeting on Thursday.

The Bank sliced interest rates to 4% last year, their lowest level for nearly 40 years, in a bid to stave off an economic downturn as the already-struggling US economy reeled after the 11 September attacks.