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 firms have suffered a slowdown in domestic and overseas orders in the last quarter, according to a survey by the CBI.
This has left employers less than optimistic about future prospects.
"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."
Manufacturers have been pushing for help from the Bank of England through another interest rate cut, but this is not expected to happen until the spring.
However, the CBI is urging an early response to calls for a cut in the cost of borrowing.
"The Bank of England is understandably reluctant to alter interest rates until more data from the High Street and wage settlements is available," the CBI said.
"But it must be prepared for a cut if there is no sign of a pick-up in the economy."
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