Small and medium-sized manufacturing firms are cutting staff at the quickest rate since the early 1990s, according to new research released by the Confederation of British Industry (CBI).

Of the 492 small firms surveyed by the CBI in this sector just under 40% axed jobs in the final quarter of 2008 and many believe the first quarter of 2009 will be even more difficult for their company.

Only 7% of the SMEs surveyed took on new employees during the final three months of last year, and over 50% reported a fall in orders, compared to just 13% that experienced an increase in sales.

"The jobs picture among smaller manufacturers has deteriorated markedly since last July in the face of rapidly declining demand for UK-made goods at home and abroad," said Russel Griggs, chairman of the CBI's Small and Medium Enterprises Council.

"Firms are steeling themselves for a very difficult few months with output and orders expected to fall at a record pace in the next quarter."