THE UK's manufacturing sector grew at its slowest pace for 18 months as the strong pound took its toll on orders, figures showed.

The Chartered Institute of Purchasing and Supply's key activity barometer eased to 51.8 in January - down from 53.7 in December and representing its second month-on-month decline.

Exporters saw demand for their goods from overseas dry up last month as the index for new export orders fell to 49.5, with any figure below 50 signalling contraction.

This was the first time in five months that UK exporters have seen orders go into reverse and took place after the pound hit a 12-year high of 1.9553 against the US dollar in December.

Rising costs also squeezed the competitiveness of manufacturers with input prices rising at a rate close to November's nine-and-a-half year peak.

Oil prices have moved steadily back towards $50 a barrel, while a report by City brokers ABN Amro found that the prices of base metals such as steel were higher during January than at any time since 1988.

Roy Ayliffe, director of professional practice at CIPS, said firms were trying to offset the rise in raw material prices by passing costs on to customers, lowering employment levels and reducing stock-holding.