THE pain inflicted by sky-high oil prices on UK manufacturing was underlined last night by a survey that found firms unable to pass on these costs to their customers.

The CBI said its September industrial trends poll found more manufacturers expecting to cut prices of their products over the next few months than raise them.

This was despite freight costs rising by a third compared with the previous month, and oil prices averaging almost $65 a barrel in September - 58 per cent higher than a year ago.

Demand for manufactured goods remains subdued, with 39 per cent of firms reporting to the CBI that they are taking fewer orders than usual.

With only 12 per cent indicating that demand was ahead of the norm, the balance of minus 27 per cent represented only a slight improvement on the August figure, which was the lowest for nearly two years.

A cause for concern for manufacturers has been a drop in overseas demand for their goods, particularly machinery and equipment. Exports have previously helped to cushion the sector from weak demand within the UK.

But according to the CBI, export orders weakened significantly this month and a negative balance of 25 per cent was the lowest mark since January.

Ian McCafferty, chief economic advisor to the CBI, said: ''A combination of weak consumer spending and challenging world markets is weighing on UK manufacturing, following the sector's contraction over the first half of the year. Cost pressures from high oil and transportation prices will only serve to depress profits further.''

Despite the weak level of orders, a majority of manufacturers expected to raise output over the next three months.