Manufacturers are facing the worst economic conditions in 17 years as demand fell sharply in September.

Data from the CIPS/Markit purchasing managers’ index shows a record low of 41, as levels of output, orders and employment fell to their lowest levels in the survey’s 17-year history.

Jobs were axed for the fifth month running, the survey showed.

UK manufacturing has been held up by the strong pound so far, which has encouraged export orders, but foreign demand has now fallen as the global economy slows.

The consumer goods sector was worst hit, according the survey, with output and new orders both at a series low.

However, there was some easing of pricing pressures as the cost of oil fell over the month.

Lower inflation may give the monetary policy committee (MPC) at the Bank of England an opportunity to cut interest rates.

Roy Ayliffe, director of professional practice at the Chartered Institute of Purchasing and Supply, said: “Given the unprecedented chaos in global economies, there was little respite for UK manufacturers in September as the sector suffered the worst operating conditions so far recorded in the survey’s 17-year history.”

The Office for National Statistics (ONS) said on a quarter-on-quarter basis, manufacturing productivity decreased by 0.5 per cent in the second quarter of 2008, compared with the previous quarter, down from a growth of one per cent in the previous quarter as output declined.