British manufacturing orders remain well below average and price pressure continues to persist, according to a closely watched survey.

The CBI industrial trends survey found that manufacturers’ orders for the month were below average in February, while most firms expected to raise their prices and for output to decline over the next three months.

The survey compiled by the Confederation of British Industry adds to a mixed picture for the UK economy since the start of the year. Households are feeling “dismal” about their finances, while companies have been cutting staff amid rising cost pressures. However, some business surveys have suggested a rise in optimism among companies since the start of the year after uncertainty over the government’s autumn budget lifted.

The CBI survey said the monthly order book balance for manufacturers stood at -28 in February, up slightly from -30 in January but well below the average of -14.

Cameron Martin, a senior economist at the CBI, said: “Many firms continue to report customers holding back amid low confidence and elevated cost pressures.”

The CBI survey asks manufacturing firms to state whether conditions are better, worse or the same on a variety of subjects, before taking a net position for responses.

Factory output also fell over the three months to February, to a balance of -14, although this was an improvement from -25 in January. Manufacturers expect their output to decline at a broadly similar pace over the next three months.

The survey’s gauge of expected prices over the next three months stood at +26, having risen to +29 in January, the highest reading since February 2023 when Britain was suffering an energy price shock after Russia’s invasion of Ukraine.

Manufacturing makes up about 9% of the economy, and the Labour government has said removing barriers for the sector’s expansion is a key priority, believing it can play an important part in boosting long-term growth for the UK.

In June last year, the government unveiled a new industrial strategy, which will include investing £2bn over the next four years to cut energy prices for thousands of manufacturing businesses.

However, this scheme will not be introduced until 2027 and the CBI said it should be bought forward to help manufacturing firms now. “Tackling punitive energy costs will strengthen competitiveness, ease cost of living pressures, and help boost demand across the economy,” it said.

The survey comes as the Federation of Small Businesses (FSB), a lobby group, said many of its members were facing “unparalleled cost pressures” that could soon lead into “deeply uncharted territory in which small business viability may collapse”.

Tina McKenzie, the policy chair at the FSB, has written to the chancellor, Rachel Reeves, asking her to implement measures that would help “stem the tide of the rising bills due in April”.