UK manufacturers are teetering on the brink of their second recession in as many years, according to a survey.

The glimmer of hope among manufacturers has been extinguished for the time being Doug Godden CBI

A monthly poll from employers' lobby the CBI showed that 45% of factory owners believe output is below normal, with just 13% reporting an increase.

The net balance of minus 32% marks a deterioration from minus 22% in November.

The CBI said the figures reflected a decline in overseas orders amid sluggish economic growth abroad.

Back in the red?

The organisation added that the manufacturing sector, which began to emerge tentatively from a sharp contraction a few months ago, was at risk of falling back into recession.

This will not alter the rate debate, consumers are still prepared to borrow and to spend Ciaran Barr, Deutsche Bank

"The glimmer of hope among manufacturers has been extinguished for the time being," said Doug Godden, the CBI's head of economic analysis.

"There will be no Christmas cheer for manufacturers this year as fears mount that the sector will slip back into recession."

The British manufacturing sector exports a high proportion of its output, making it vulnerable to sluggish growth overseas.

The CBI's latest figures suggest that slowing growth in the eurozone and a stop-start recovery in the US are once again taking their toll on British factory orders.

Rate dilemma

Ciaran Barr, economist at Deutsche Bank, said persistent strength in consumer spending meant signs of renewed weakness in the manufacturing economy were unlikely to spur the Bank of England to cut interest rates.

"This will not alter the rate debate. Consumers are still prepared to borrow and to spend so the Bank will sit on their hands for the time being," he said.

The Bank of England has kept interest rates on hold at 4% for 13 months despite repeated calls for a cut to stimulate demand for factory goods.

Its reluctance to trim borrowing costs partly reflects fears that sky-high house prices could crash if pushed up any further.