Small and medium-sized manufacturers are struggling to cope with rising energy and raw material costs, the Confederation of British Industry (CBI) has warned.

The business group's survey revealed that average unit costs had increased in 51% of the companies surveyed in the first quarter of 2008, with just 7% saying they had decreased.

But despite this many manufacturers have taken on extra staff, with the weaker pound making UK exports more attractive.

The additional costs mean many manufacturers have increased prices, with the burden likely to be felt more by businesses than consumers, the CBI added.