Exports help limit manufacturing slowdown but conditions vary greatly across UK

But, while there was a downturn in sentiment across most regions, Welsh firms bucked the trend with an upturn in confidence about the general business situation and for export prospects in the year ahead.

At a national level, the volume of total new orders was stable over the past quarter but the regional picture was mixed. In six regions total new orders fell, notably in the South West and South East.

By contrast, in Wales total orders surged to record the strongest gain since 1995. They also improved markedly in Northern Ireland and modest increases were seen in Scotland and the West Midlands.

Helped by the weaker pound, manufacturers saw an improvement in exports across the majority of regions. Firms in Wales reported the most positive growth in export orders since the survey began, Yorkshire & the Humber also reported a strong increase, as did Scotland, the West Midlands and South West. Only the North West and East Midlands saw marked falls in export demand.

Slightly positive expectations for total new orders over the next three months have been helped by exports, with Wales and Yorkshire & the Humber seeing the biggest advances in overseas markets. Indeed, Welsh firms have the highest expectations about export demand since 1994 and the figure for Yorkshire & the Humber is the strongest on record. Only three regions, led by the North West, expect exports orders to decline.

Output at the national level was broadly unchanged in the past three months, contrary to expectations of healthy growth. Four regions, notably Wales, Northern Ireland and the North East, reported above average growth. However, the picture elsewhere was mixed, with three regions reporting output as broadly unchanged and four saying it had contracted.

Expectations for output are generally gloomy - particularly in the South of the country. The South West, South East & London and the East of England all expect marked falls in output in the next three months.

Manufacturers across all of the regions experienced sharp rises in unit costs - driven by more expensive energy and raw materials - and in many cases these were the steepest since the early 1990s. Record high increases were reported in Northern Ireland and the North West, and there were also sharp increases in the North East, Wales and Yorkshire & the Humber.

In an attempt to counter the impact on their profit margins, firms in most regions said they had raised prices. Those in Northern Ireland and Yorkshire & the Humber reported the strongest increases in domestic and export prices.

Nationally, employment continued to fall over the quarter, in line with the long-term trend. The southern regions - East of England, the South East & London and the South West - all reported significant job losses. But two regions, the North East and Wales, reported marked job gains.

According to CBIExperian estimates based on the survey results, 18,000 manufacturing jobs will be lost in the second quarter of this year. The brunt of this will, again, be felt across the South - the largest job cuts in absolute terms (5,000) are expected in the South East & London, whilst the largest percentage fall (1.2 per cent) is expected in the South West. 3,000 jobs are forecast to go in the East of England.

Investment intentions remain subdued. In several regions there are expectations of much reduced expenditure on buildings and plant & machinery in the coming 12 months. The regions with the weakest investment outlooks are Northern Ireland and the South West.

Peter Gutmann of Experian said: "The survey suggests that the pound's 14 per cent depreciation against the euro over the past year is helping to support manufacturing exports, at a time when eurozone growth is faltering. This is the one bright spot in a fairly downbeat picture. Without this boost, manufacturers would be facing even tougher conditions in the coming months." Lai Wah Co, the CBI's Head of Economics Analysis, said: "The slowdown underway in other parts of the economy is now being felt in the manufacturing sector. Look under the bonnet, however, and you'll see some marked regional differences.

"Welsh firms actually feel extremely upbeat after a very strong quarter, whereas the story in the South is of falling demand, shrinking output and declining jobs."