INDUSTRY leaders have called for a half-point interest rate cut after it emerged export prospects were at their bleakest since 1980.

The CBI's latest quarterly industrial trend survey found that 59 per cent of manufacturing firms were less optimistic about exports in the wake of the US terror attacks.

Total business confidence also fell to a three-year low as 60 per cent of respondents said they were less optimistic about the general situation.

The CBI cautioned that confidence may have been unduly influenced by recent events, but said some of the figures were still "deeply worrying".

CBI director general Digby Jones believes the recession-hit manufacturing sector needed decisive action from the Bank of England's Monetary Policy Committee (MPC) next month. Interest rates are already at their lowest level for 37 years at 4.5 per cent.

Mr Jones said: "Business needs decisive and meaningful action to shore up confidence. This means the MPC must cut rates by half a per cent. The picture is extremely mixed, but many sectors are experiencing the worst conditions since 1991.

"With the inflation outlook benign, there is ample scope for the bank to lower rates and the economic situation justifies a half-point cut."

The survey also found that domestic orders are expected to fall at the fastest rate since January 1991.

With export prospects declining at their fastest for 21 years, manufacturers said political and economic conditions, rather than concern over prices, were acting as a constraint.

Ian McCafferty, the CBI's chief economic advisor, warned: "The survey shows the main impact in the UK economy of the US tragedies is being borne by UK exporters.

"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."

Firms of all sizes and sectors said they expected numbers employed to fall at a faster rate in the next four months.

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union (AEEU) said: "The DTI must take this crisis in the engine room of Britain's export economy at least as seriously as the Government rightly took foot-and-mouth."