Confidence among Britain's embattled manufacturers slumped to a near-record low last month as the recession battered industry and bosses embarked on a massive post-Christmas jobs cull, according to figures published today.

In the latest monthly purchasing managers index, the headline confidence number for managers stood at 35.8 in January.

This is higher than December, which the index stood at 34.9, but is the third-weakest recording since the PMI was founded 17 years ago.

The survey of manufacturers' confidence came as sterling came under pressure today ahead of the Bank of England's decision on Thursday on whether to cut interest rates for the third month in a row.

The Bank is expected to cut interest rates by 0.5 per cent to 1 per cent in an effort to stave off the worst effects of the recession.

"The latest PMI figures highlight the appalling market conditions that UK manufacturers are currently facing," said Rob Dobson, an economist at Markit, which compiles the index for the Chartered Institute of Purchasing and Supply.

The index suggests that production among Britain's manufacturers is falling by about 6 per cent year-on-year, Mr Dobson said.

Howard Archer, the chief UK and European economist for Global Insight, said: "The bad news is that this is still a desperately weak survey that does not fundamentally change the view that the UK manufacturing sector is in dire straits.

"Indeed, with a number of factories recently indicating that they are going on to a reduced working week or even stopping production for a while (Honda) due to sharply reduced demand, it seems certain that the manufacturing sector will see sharp contraction for some time to come."

Within the overall PMI figure, confidence in employment fell to a record low of 33.5, from 33.9 per cent last month.

Manufacturers have been laying off staff in the thousands as they baton down the hatches against the recession. Late last month, Corus, the steelmaker, revealed plans to cut an estimated 2,500 jobs.

Over the weekend, it emerged that GlaxoSmithKine was considering job cuts reported to reach about 6,500.

Sterling fell 1.75 per cent to $1.4250, down from $1.4530 on Friday when it hit its strongest level since mid-January.

“The move this morning is dominated by talk about interest rate cuts in the UK this week,” James Hughes, market strategist at CMC Markets in London, told Reuters.

“Sterling’s downside this week will depend on how much of a Bank rate cut the market will factor in.”

Sliding stock markets also rattled the UK currency. The FTSE 100 index of blue-chip shares was down more than 2 per cent on fresh worries in the financial sector.

Barclays led the fallers after Moody's, the credit rating agency, downgraded its debt.

Ratesetters at the European Central Bank are meeting this week but it has already signalled that the next move in rates will not come before March. The European interest rate is currently 2 per cent.

The euro rose 1.6 per cent against the pound to 89.34p, stronger than its 88.04p on Friday.

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