The Purchasing Managers Index (PMI) of the Chartered Institute of Purchasing and Supply (CIPS) fell to an all-time low of 41.5 in October, the largest single contraction of the manufacturing sector index since the survey began in 1992. That compares to a figure of 45.6 in September.

There was a marked decline in demand for manufactured goods, with both export orders and domestic demand falling sharply.

Overall order books fell for the seventh straight month, while export orders have now declined for ten months in a row.

One in three firms reported that they were cutting production, and that was the largest fall in output ever recorded by the survey.

And one in four manufacturing companies reported that they were shedding jobs, with an increasing proportion turning to redundancies rather than natural wastage.

Weak demand has meant that prices have continued to tumble, with excess capacity and high levels of unsold stocks leading to the sharpest recorded drop in the history of the survey.

Rob Hayward, an economist with the Bank of America in London, commented:

"These numbers are consistent with a reasonably sharp fall in manufacturing in the period ahead. Everything else which is happening around the globe and the continuing effects of the strong pound are going to squeeze that sector of the economy and I think it will feed through to other parts of the economy as well."

The CIPS survey uses an index figure of 50 - if orders are growing overall, the index should be above 50, while declines will see the index register below 50. The PMI is a weighted index of the five key indicators.

The monthly survey of opinion asks around 500 managers involved in business purchasing decisions whether orders, output and employment, etc. are higher, lower or the same as last month.

The latest survey was carried out between Oct 15 - 30.