Factories recorded modest rises in domestic demand and production over the past three months. Companies are also predicting a run-down of their stock holdings, the CBI's October showed.

Of the 446 manufacturers polled in the latest Quarterly Industrial Trends Survey, 30 percent said that domestic orders rose in the three months to October and 25 percent said that they fell. The resulting balance of +5 percent indicates a very modest rise over the past quarter, although this was slightly better than expectations of no growth, the CBI said.

The drop in however was recorded as the sharpest since April 2009, with net balances of -30 percent and -24 percent of directors reporting that they were less optimistic than three months ago.

"Sentiment has deteriorated sharply, and firms expect sizeable falls in activity over the next three months. The quarterly fall in sentiment is the highest since the height of the recessions in mid-2009," said CBI chief economic advisor Ian McCafferty (pictured).

"Confidence among manufacturers is no doubt also being sapped by uncertainty over developments in the euro zone, leading to broader concerns over global growth."