According to the Confederation of British Industry (CBI), UK export orders are now at their lowest level since January 1983. The manufacturing order book has shown its most rapid monthly decline for two years.

The weak output figures caused sterling to slip against the Deutschmark with the CBI survey lending weight to the argument that interest rates have risen high enough and that the next movement should be downwards.

But the Bank of England has a delicate balance to strike as a two-speed economy develops, with the manufacturing sector in the doldrums while the service industry continues to perform strongly.

Manufacturers face an uncertain future

Domestic orders have held up but this has not been enough to offset the fall in exports. The CBI said that manufacturers' pain was unlikely to ease in the short term, with output expected to stand still for the next four months despite the recent fall in the value of the pound.

In its quarterly economic survey the CBI said that export volumes growth will fall to 1.4% this year (against forecasts in February of 3%) and recover to 3.3% next year.

The latest CBI industrial trends survey shows that only 9% of manufacturers reported export order books above normal. Some 60% had order books below normal.

Sudhir Junankar, CBI's Associate Director of Economic Analysis, said: "The strong pound is still hitting exporters hard, even though it has fallen from its recent high against the Deutschmark."