BRITAIN'S manufacturing industry is in danger of slipping into recession, a leading stockbroker warned yesterday.

Figures released by the Office of National Statistics (ONS) showed a surprise 0.1 per cent fall in output in November.

Analysts believe figures released next month will confirm output has fallen for the second quarter in succession - the definition of a recession.

The sector, which had been expecting a 0.2 per cent improvement, has seen a decline in five out of the past six months.

Simon Rubinsohn, chief economist at fund manager Gerrard, said: "On this basis, it would not be unreasonable to conclude that the manufacturing industry has slipped back into recession."

The latest fall, which left output for the past three months down 0.5 per cent on the previous quarter, arose from a 1.9 per cent decline in the chemicals and man-made fibres industries.

The manufacturing sector was last in recession in 2002, but showed some signs of recovery towards the end of 2003 and early last year.

The Bank of England's monetary policy committee received the figures ahead of its decision yesterday to keep interest rates unchanged.

Mr Rubinsohn said the figures were likely to increase the likelihood of rates remaining unchanged at 4.75 per cent throughout this year.

He said: "We suspect that any rebound in manufacturing output in 2005 will be of very modest proportions.

"This will be partly because of a likely lacklustre economic performance from the eurozone."

Mining and quarrying output increased by 1.3 per cent in November, due to rises in oil and gas production, while the electricity, gas and water supply sector saw a 1.1 per cent rise.

However, Alan Hall, regional director of the Engineering Employers Federation (EEF), said: "We still believe manufacturing will have growth of two per cent this year.

"It is very early in the year to know what companies will be facing, and I accept that the scene is not without its complications.

"But we do not accept that manufacturing will go back into recession in 2005."

He predicted that the Bank of England would decide to cut interest rates later in the year.

"As we go through the year, the MPC will be forced to look at reducing interest rates to rebalance the UK economy," he said.