Manufacturing is set to contract more in the West Midlands in the next three months than anywhere else in the country, the CBI says today.
Up to 6,000 jobs could go as companies retrench in the teeth of soaring costs and falling orders.
The CBI paints a gloomy picture of the region's prospects in its latest regional trends survey published in conjunction with credit data specialist Experian.
Manufacturers throughout the country are continuing to struggle with further declines in orders undermining output
and confidence in most regions of the UK. In fact, the national fall in output in the last three months came despite expectations of a levelling off in industrial activity.
For the second quarter running, the decline was driven mainly by the weakness of the home market - but exports are also down.
High energy costs are adding to manufacturers' woes and the Bank of England needs to be ready to cut interest rates in the coming months, commentators said.
In the West Midlands, 59 per cent of companies surveyed were working below capacity; orders fell by 26 per cent; output was 14 per cent down and employment fell by 27 per cent.
Of the West Midlands, the CBI/Experian report says: "New orders fell sharply, and by more than the UK average for the seventh time in eight surveys. A further marked decline in total orders is expected over the next three months, against a stable outlook at the UK level.
"Employment fell sharply in the current survey, with only the South-east and London seeing a sharper decline. Prospects are even more downbeat, with the region expected to experience the sharpest contraction of all UK regions in the next three months."
In the East Midlands the picture was a little brighter, with firms reporting the first increase in new orders for a year, including a "substantial" rise in exports.
Experian estimates that a further 24,000 manufacturing job losses can be expected in the current quarter, 6,000 of them in the West Midlands.
Economist Dimitri Gunawardena of Experian said: "The poor performance of manufacturing in the fourth quarter continues to reflect the weakness of economic fundamentals.
"A combination of subdued d omestic and external demand, coupled with declines in output and employment, has undermined confidence in most regions.
"In addition, unit costs have been rising and companies' pricing power is limited, intensifying pressure on margins."
CBI economist Doug Godden added: "With some notable exceptions, manufacturers continue to experience difficult times, with high energy costs continuing to add pressure to profit margins.
"Whilst a reduction in interest rates this month appears unlikely, with inflationary pressures remaining at bay, the Bank of England must stand ready to cut in the months ahead should the nascent economic recovery fail to gain momentum."
Along with the East Midlands, Yorkshire and the Humber was one of the bright spots in the latest survey.