Staffordshire-based machinery giant JCB is to axe almost 700 jobs because of the lack of credit available from banks coupled with continuing low confidence.
Several sites will be hit by the cuts, including plants in Staffordshire, Derbyshire and North Wales. The Staffordshire plant at Rocester will be worst hit, with 400 jobs lost.
Workers at the company voted to reduce their hours last year in a bid to save jobs, a move which the firm said has protected over 300 employees from the threat of redundancy.
Production in the UK in the first three months of 2009 will be around 75% lower than at the same time last year, the company revealed, while an anticipated upturn in the second quarter now shows "no sign" of materialising.
JCB chief executive Matthew Taylor said: "Back in November we forecast a moderate second quarter recovery in 2009 based on the fact that Governments around the world had pumped a huge amount of money into recapitalising financial institutions and had committed to stimulus packages which included significant spending on public construction projects.
"Two months later, despite the recapitalisation, customers are still struggling to buy machines because of a lack of available credit, and with Government-funded construction projects not moving forward quickly enough, this means the anticipated second quarter recovery simply won't happen.
"The ongoing reluctance of the banks to provide credit is aggravating an economic downturn which is now becoming much steeper than we could have ever envisaged.
"This unprecedented situation needs to be addressed with some urgency so that confidence and stability can return, otherwise irreparable damage will be caused to the UK's manufacturing industry."
The company said it undertook its biggest-ever training initiative last week when there was no production, involving more than 2,000 employees completing a programme which will result in achievement of NVQ and City and Guilds
The latest job losses affect 593 shop floor and 91 staff positions and are in addition to 1,000 redundancies announced since July.
JCB employs around 7,900 globally, with around 4,800 in the UK, including more than 4,300 in Staffordshire.
Joe Morgan, regional officer of the GMB union, said: "We are very disappointed at this announcement. Our members have done everything possible, including sharing the misery, to try to avoid further job losses.
"We will be seeking talks with JCB to minimise the job cuts."
Joseph Cyril Bamford launched the construction and agricultural equipment company that bears his initials in 1945.
The company is the world's third largest manufacturer of construction equipment, and has manufacturing bases in the UK, US, Brazil, Germany, India and China.