According to the latest regional trends survey published by the CBI (Confederation of British Industry) and Experian, the fall in new orders has been the sharpest for two years.
"It is clear that cost increases remain a pertinent issue for manufacturers nearly everywhere," said Doug Godden, CBI head of economic analysis.
"We hope that the re-elected government will reinvigorate its efforts to reduce red tape, and demonstrate that there is no agenda to push up business taxes further."
The quarterly survey shows that three regions in particular - Northern Ireland, the North West and the West Midlands - have borne the brunt of the weak demand that has emerged in recent months, with the decline in business confidence and export optimism much steeper than the UK average.
The survey shows that these regions were hardest hit by the fall in total orders for the second survey in a row, and this is reflected in a steep fall in output in the past six months.
Outside these hard-hit regions, output trends have been less gloomy. Declines in the last few months have been quite small and in the case of Wales, the South West and the North East, output actually shows a very slight increase. Scotland reports a reasonable increase for the fourth survey in a row.
On a number of other key indicators, Scotland and Wales appear to have escaped the worst of the problems facing manufacturing. The proportion of firms working below capacity is far lower than in the rest of the UK; employment in Wales has increased perceptibly in each of the past four surveys and the trend in Scotland has been generally positive. In Wales there has been a marked upswing in expectations of spending on plant & machinery.
While employment contraction at the UK level has moderated over the past 18 months, compared with 2002 and 2003, the pace of job losses in manufacturing continues unabated in the South East & London, the East Midlands, East of England and Northern Ireland. These four regions, along with the West Midlands, are much more pessimistic about the employment outlook than the rest of the UK.
"The fall in business confidence among manufacturing firms highlights a number of adverse features that outweigh continuing strength in the global economy," said Peter Gutmann of Experian.
"UK manufacturers are finding it difficult to increase exports in the face of poor eurozone demand and the weak dollar. At the same time import penetration is still eroding their share of the domestic market and slowing retail sales evident in recent months is a further negative factor."
The results of the CBI/Experian Regional Trends were taken from the 676 replies to the CBI's Quarterly Industrial Trends Survey received between 23 March and 13 April 2005.
The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. The organisation is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms.