Manufacturing orders expanded at their fastest pace in five months, but firms expect export orders to flatten as the eurozone continues to stagnate.
The total order book balance from the CBI's monthly Industrial Trends Survey lifted to a balance of plus 20 in January, its highest level since July.
But export orders over the coming three months tumbled to plus one, the lowest since July 2012.
Firms across the country continue to look anxiously at weakness in the 19-bloc eurozone, which accounts for half of UK exports. The CBI report said: "Over the next three months, firms anticipate new export orders to be flat, acting as a drag on total orders growth, while domestic orders are set to continue rising, if at a somewhat slower pace compared to previous quarters."
The survey put total new orders over the coming quarter at a balance of plus 11, lower than the plus 20 reached three months ago, but above the long-term average of plus four. Firms said access to skilled labour and capacity constraints would limit output in the next quarter. They added that price competition would also limit export orders.
CBI director of economics Rain Newton-Smith said: "British manufacturers are still heading along the right path - new orders are up, bolstered by domestic demand and more people are getting work in factories across the UK.
"Exports have grown modestly, but there is a feeling that we will not see a repeat in the next quarter, especially with the eurozone still treading water and battling deflation."
The report added that amid falling oil prices, firms said that average unit costs at a balance of plus six were the lowest since July 2012. Ms Newton-Smith added: "Falling oil prices should be positive for the UK economy overall, benefiting households and lowering costs for firms, although North Sea oil producers are being hit."