In its first survey since the terrorist attacks on America, the CBI also revealed business confidence had fallen to its lowest point in three years.
The findings show 59% of firms are less optimistic about export prospects in the year ahead, while 6% have a more positive outlook.
In the past four months, new orders have fallen at their fastest rate since 1999, with domestic orders falling despite expectations of stable domestic demand and export orders falling faster than expected.
Other negative trends mentioned in the survey include the fall of manufacturing output, down unexpectedly at the fastest rate since 1999, investment plans deteriorating most sharply in two and a half years, higher unemployment and profit margins squeezed further.
CBI chief economic adviser Ian McCafferty said: ‘The survey shows the main impact on the UK economy of the US tragedies is being borne by UK exporters. As a result, the imbalances in our two-speed economy are likely to worsen over the winter.
‘However, an overall recession is unlikely as the resilience of the consumer sector will continue to provide support.’
As a result of these findings, the CBI is calling for the Bank of England to cut interest rates by half a point. Director-general Digby Jones said: ‘Business needs decisive and meaningful action to shore up confidence. This means the Monetary Policy Committee must cut rates by half a percent.
‘With the inflation outlook benign, there is ample scope for the Bank to lower rates and the economic situation justifies a half-point cut. If the bank was not to cut rates by half a point now, it is difficult to think of a situation when it will.’
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