Small manufacturers are find it particularly hard to ride out the storm besetting the UK's factory sector, a survey has said.

In its regular quarterly survey of smaller manufacturers, the employers' organisation - the CBI - found that 22% of firms said that orders had increased over the past four months.

Smaller manufacturers continue to face torrid times

Simon Bartley, CBI

But nearly twice as many, 40%, reported that orders were down.

That was a far gloomier result than the CBI had been expecting.

Pessimistic outlook

It was a similar story when it came to factory output.

While 22% of companies said that output was up, 37% reported a fall.

And small firms were more negative about orders and output than medium-sized businesses.

The CBI said the unexpected drop in orders and output had hit confidence about the general business situation and about exports.

Companies said they were expecting orders and output to continue falling, though at a slower rate.

Challenging future

Employment also fell further than expected, although the rate was the slowest since July last year.

Prices also fell more sharply than predicted and at the same time the companies had to absorb slight increases in costs.

"Smaller manufacturers continue to face torrid times," said Simon Bartley, chair of the CBI's small and medium-sized businesses council.

"Recovery hopes have been gradually revised downwards as smaller firms have come to expect a more protracted turnaround than previously hoped.

"With no sign of a pick-up in global demand, companies face a challenging future."

Good signs for retailers

Separate research found that the number of profit warnings from companies had eased.

KPMG Restructuring recorded 1,287 company warnings in the three months to the end of September, compared with 1,308 in the previous quarter.

It said manufacturing was one of the hardest hit sectors.

"The trading environment continues to stay tough and is likely to remain so over the next six months," said Philip Davidson, head of KPMG Restructuring.

The bright spot was in retailing where the number of firms experiencing problems had fallen by 9%.