MANUFACTURING order books have slumped to their weakest since October 2003, according to the CBI's latest Industrial Trends Survey.

Cost pressures remain intense. Oil prices have risen by more than two dollars a barrel since the previous survey, which is 46 per cent higher than a year ago.

Metal prices are also 17 per cent higher than the corresponding period last year.

CBI South East Regional Director Malcolm Hyde said: "Demand is subdued with all the main industry groups reporting that order books are below normal.

"Manufacturers are facing a further squeeze on profit margins over the next three months as they remain unable to pass on costs incurred from rising prices of oil and metals."

The pressure on profit margins is expected to intensify as firms doubt that they will be able to pass on cost increases to their customers. Domestic prices are expected to fall over the coming quarter, with expectations at their weakest since March 2004. Prices are expected to return to the downward trend of the past seven years, following an 18-month pause.

The survey shows 39 per cent of firms reporting their order books are below normal, while 14 per cent say that they are above normal.