Concerns over the health of the manufacturing sector were fuelled yesterday by signs that the sector's woes continued into the new year.
A survey by business body CBI found that both domestic and export orders fell in January for the first time in two years, while production weakened sharply over the past three months.
Although a modest rise in export orders is expected in coming months, the sector remains "fragile", it warned.
The survey offers further evidence that manufacturers are failing to spearhead the UK's recovery by boosting exports as hoped by the Government. It comes after official figures revealed manufacturing declined 0.9% in the final three months of 2011, which was a key driver in the UK's worse-than-expected 0.2% fall in GDP.
The sector, which had been in growth earlier in the year, has been hit as weak consumer spending depressed demand in the UK, while its key exports were hit by the eurozone debt crisis.
CBI chief economic adviser Ian McCafferty said: "While the acute fears seen at the end of last year over global demand may be subsiding, 2012 will prove to be a difficult year for UK manufacturing, as the crisis in the eurozone - our biggest export market - has yet to reach any definitive resolution."
The CBI survey revealed that manufacturers expect output to rise slightly in the next three months despite worsening confidence about the general business situation and exports amid fears over the slowdown in the world economy.
Andrew Sissons, a researcher at The Work Foundation, said that the health of the manufacturing sector was key to the UK's recovery.
He said: "Without a recovery in exports and manufacturing it is hard to see how the economy can escape its trajectory of low growth in the short term.
"The Government must focus on restoring confidence to business and boosting exports in the year ahead - this must start with a coherent and substantial growth plan in the Chancellor's Budget in March."