Confidence among manufacturers has fallen in every region of the UK as companies struggle with the soaring cost of raw materials, a CBI survey shows.

The index of business optimism slipped to minus 40 in the three months to July, the weakest figure since 2001, but a regional breakdown out today shows that the gloom is more intense in Yorkshire and the Humber, the North West, the West Midlands and London and the South East.

About 70 per cent more companies in the North West reported a fall rather than a rise in optimism for the coming months, while a balance of 67 per cent of companies in the West Midlands expected conditions to worsen. The outlook among companies in Yorkshire and the Humber and London and the South East was only marginally less gloomy, with a respective balance of 62 per cent and 53 per cent more companies predicting that conditions would deteriorate. Manufacturers in Northern Ireland were the least pessimistic, with only 6 per cent more reporting a fall in optimism rather than a rise.

Lai Wah Co, the CBI’s head of economic analysis, said: “Manufacturing confidence has tumbled over the past quarter. The climb in oil and other raw material prices over recent months has driven costs up significantly. Although firms are having some success in passing these costs on, profit margins are under pressure.”

All regions felt the impact of spiralling oil prices, reporting increases in input prices. The rise in unit costs across the UK in the three months to July was the steepest since the survey began in 1988, with companies in Yorkshire and the Humber, the North West and Scotland reporting that this increase was the sharpest they had experienced.

The outlook for employment among manufacturers is also gloomy, with companies in most regions expecting significant falls in employment in the coming months. The East Midlands is the only region where staffing is expected to increase.

This came as a new survey showed that fears about the UK jobs market intensified in July. About 57 per cent more people said that employment prospects were worse now than 12 months ago, up from 45 per cent in June, according to the Lloyds TSB Consumer Barometer. This is the lowest figure since the survey began in 2004. Job security also fell to a record low, with 17 per cent of workers feeling less secure rather than more secure, up from 14 per cent in June.

Trevor Williams, the chief economist for Lloyds TSB Corporate Markets, said: “The combination of falling employment confidence and rising inflation expectations is a lethal cocktail for consumer spending.”

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