As retailers look for a sales boost from Monday's VAT cut, manufacturers could be facing the toughest trading conditions for two decades.

EEF, an organisation that represents manufacturing companies, said the outlook had taken a significant turn for the worse.

A deterioration in orders was experienced across all regions, with London and the South East, and Yorkshire and Humberside reporting the weakest prospects and remaining pessimistic about the next three months.

"Trading conditions in 2009 look set to be some of the toughest for two decades," says David Seall, EEF south east region director.

"What marks this downturn out from others is the alarming rate at which conditions have deteriorated through the autumn due to the problems in the financial markets. It is now imperative government and the Bank of England continue to pull on every lever at their disposal."

In the south east, an EEF survey found that manufacturing output had turned negative, with a third saying output was declining. Export orders are also declining but at a slower rate than in domestic markets.

Worryingly, the outlook for jobs has deteriorated and output was expected to fall further in the next three months. 2009 forecasts show manufacturing falling by five per cent and engineering by 6.3 per cent.