UK manufacturing will slow sharply over the next few months in the face of falling demand and rising material prices, according to a survey by the CBI and credit rating agency Experian.

The survey revealed that average unit costs rose at the fastest pace since 1988 in the past three months, while manufacturers in seven regions - including London and the West Midlands - saw a decline in orders. Overall the total manufacturing output was unchanged.

"Manufacturing confidence has tumbled over the past quarter," said Lai Wah Co, head of economic analysis at the CBI. "The climb in oil and other raw material prices over recent months has driven costs up significantly."

The impact of the credit crunch has at least led to some good news for manufacturers though: UK exports have become much more appealing to companies in the Euro-zone due to the weakness of sterling against the euro.