The CBI says UK manufacturing is cutting its wage bill

Business leaders' group the CBI said its monthly manufacturing order books balance was -28, after -22 in December, its lowest since August 2005.

And UK manufacturers cut about 25,000 jobs in the quarter as they struggled to pass on rising costs to customers.

The total number of jobs lost in the manufacturing sector over the past year was 106,000, the CBI's quarterly industrial trends study revealed.

'Efficiency' measures

Ian McCafferty, CBI chief economic adviser, said: "Conditions for manufacturers are getting increasingly tough as costs continue their seemingly inexorable rise, but weak demand keeps prices down, squeezing already thin profit margins even further.

"The sustained high level of oil and sharply increased gas prices have driven up energy and raw material costs.

"Manufacturers are continuing to respond by cutting employment to curb the wage bill and boosting investment in efficiency-improving measures."

However, it is not all gloom, as manufacturers remain confident that they will be able to pass on rising costs in price rises to the domestic market this year.

And the CBI survey shows that export order books are at their best for 17 months.