This fall was largely attributed to sectors including mechanical engineering, food and drink, tobacco, paper and printing & media, the Confederation of British Industry (CBI) said.
The survey, which was based on the responses of 220 manufacturing firms, also found that selling price inflation is expected to accelerate slightly in the next three months although below the record high reached earlier this year.
The volume of goods and services produced by factories fell by 9 per cent in the three months to December – a steep drop from the 18 per cent rise in output reported in the previous three months to November, and means it contracted at the fastest pace since September 2020.
Anna Leach, CBI deputy chief economist, said: “The corrosive effect of higher inflation on demand is increasingly clear, as manufacturing output contracting at the fastest pace in two years over the last quarter.
“While some global price pressures have eased in recent months...