Manufacturers are becoming slightly happier with their situation, although jobs and profits remain under pressure.

A new report from the Confederation of British Industry and consultancy Business Strategies, said while some problems remained, manufacturers around the UK were less gloomy.

However, the pattern is mixed around Britain, with the manufacturing heartlands in the West Midlands and northern England generally performing less well than other parts of the UK.

The North West and the North East saw the sharpest falls in business confidence, reflecting declining output and demand.

Overall optimism fell in the South East, although export optimism was broadly stable.

However, on the plus side, Northern Ireland and Wales saw increases in overall confidence, while the East Midlands and South West saw export optimism increase after falling in the previous survey.

But overall demand remained weak in nearly all regions, with a particularly severe contraction in total new orders in the North East and substantial falls in the North West and West Midlands. Only the East Midlands reported a rise in total orders in the past four months.

Despite the weakness, most regions expect the trend in demand to improve in the next four months. The survey showed profit margins were being squeezed further because of rising unit costs and lower prices.

Hann-Ju Ho, senior economist at Business Strategies, said: "Higher oil prices have fed through to unit costs for manufacturers in the survey.

"Combined with intense competition and the high level of sterling, profit margins remain extremely tight for a lot of manufacturers. More will go to the wall, meaning further job losses."