SMALLER manufacturers have seen orders decline at the fastest rate for a year, with confidence falling for the first time a year.

The Confederation of British Industry's (CBI) quarterly survey of small and medium-sized companies showed that recovery was proving elusive for the sector.

The employers' body said that only an unexpectedly strong upturn in demand could justify another interest rate rise at this stage.

The survey showed that 33 per cent of companies saw orders fall and 23 per cent saw them rise. The balance of minus ten per cent is the largest fall since October last year, and compares with a balance of minus three per cent in the previous survey.

Hugh Morgan Williams, of the CBI, said: "Smaller manufacturers have endured their toughest quarter for a year. Recovery is proving elusive as companies struggle with commodity costs that have hit record highs.

"Confidence has slumped, with orders falling at home and abroad.

"Manufacturers of all sizes will be hoping that interest rates are either at, or extremely near, their peak."