Companies in the UK are being choked by high energy prices and expect to lay off workers in the next few months, business leaders warn.

Small and medium-sized manufacturers - which directly account for 2.4 million jobs in the UK - have suffered a slowdown in domestic and overseas orders in the last quarter, according to a survey by the Confederation of British Industry (CBI).

Planned investment in buildings and plant and machinery over the coming year has been reduced. However, spending on product and process innovation and training and retraining is forecast to rise.

“Oil prices are still high and hurting smaller manufacturers,” said CBI official Steve Sharratt. “The relative weakness of the domestic economy is undermining demand so businesses cannot pass on the increased costs, in the form of higher prices, to their customers.”

The data was extracted from the CBI’s quarterly industrial trends survey, conducted between December 12 2005 and January 11 2006.