Manufacturers are planning to cut investment in plant, machinery and buildings, reflecting deteriorating confidence and uncertainty about future demand, according to the Confederation of British Industry.

The CBI’s Quarterly Industrial Trends report surveyed 676 manufacturers between 23 March and 13 April.

The survey found that manufacturing orders have fallen sharply since January, with firms reporting the weakest quarterly performance since July 2003.

However spending on training and retraining and on innovation is expected to increase modestly.

Over the three months to April, costs and prices increased at the fastest rate since July 1995.

Falling orders and output, coupled with rising costs have led to the third successive deterioration in confidence from manufacturers.

Sir Digby Jones, CBI director-general, said of the results: “This is further evidence that any post-election tax raid on business would hit a manufacturing sector already in a fragile position. We will resist any such move fiercely.

“The Bank of England must continue to ensure that inflationary pressures remain under control, but they must also avoid a premature rise in interest rates.”