BRITISH industry piled more pressure on the Bank of England to make another cut in UK interest rates after manufacturing orders were shown to have fallen at their sharpest rate for four years in the first quarter of this year.

In its quarterly industrial trend survey, the Confederation of British Industry (CBI) said optimism among UK manufacturing companies had fallen to its lowest level since January last year.

The fall was driven by a sharp decline in domestic demand.

Experts suggested the weakness in global trading conditions that caused the manufacturing recession has spread to the home market, where orders were now falling at their sharpest rate since April 1999.

The decline in manufacturers' confidence can be attributed in part to the war in Iraq, the CBI said.

Digby Jones, director general, said: ''The end of the Iraq conflict will steady nerves. But the world's economic problems were there before the war and they are still there now.

"Manufacturers hoped that domestic demand would hold up until there was a pick-up in global trade but that does not seem to be happening."

Total orders fell faster than expected during the past four months, with 37 per cent of firms reporting a fall, while 16 per cent saw a rise.

Total orders were expected to continue falling sharply during the coming months.

The gloomy outlook has been compounded by a slowdown in other parts of the economy, most worryingly in consumer spending, the CBI said.

The survey also said the pace at which companies were shedding jobs was expected to accelerate during the next four months to its highest rate for a year.

Job losses among UK manufacturers showed another significant decline during the first quarter of this year, the survey found.

Costs among British companies also rose slightly during the past four months, probably reflecting the war premium on the price of oil.