The CBI is calling for a cut in interest rates after publishing a report showing total manufacturing orders falling at the fastest rate for four years.
Its Quarterly Industrial Trends survey, published today, is particularly worrying as this latest decline in orders has been driven by a sharp deterioration in domestic demand.
This suggests the weakness in global trading conditions that caused the manufacturing recession is spreading to the home market, where orders are now falling at the fastest rate since April 1999.
The survey also shows a decline in manufacturers' confidence, which can probably be attributed in part to the war in Iraq - but this is the third consecutive survey to register a fall.
Total orders fell faster than expected over the past four months. Thirty-seven per cent of firms reported a fall, while 16 per cent saw a rise.
The difference between the two gives a negative balance of minus 21 per cent, compared with minus nine per cent in the January survey. Total orders are expected to continue falling sharply over the coming months.
Digby Jones, CBI director-general, said: "The end of the Iraq conflict will steady nerves. But the world's economic problems were there before the war and they are still there now. Manufacturers hoped that domestic demand would hold up until there was a pick-up in global trade, but that does not seem to be happening.
"This has been compounded by a slowdown in other parts of the economy, most worryingly in consumer spending It would be wrong to overstate the situation - we are not predicting a recession at all. But the time has come for another cut in interest rates to see us through this difficult patch. The prospects for a sustained recovery appear a long way off and signs of inflation in the wider UK business sector are rare."