Growth in manufacturing activity ‘softened’ in the three months to October, according to the latest CBI quarterly Industrial Trends Survey.

Optimism about business conditions fell, for the first time in a year, and while confidence about export prospects continued to rise, it did so at a slower pace.

Growth in output, domestic orders and export orders also slowed down — but remained above the long-term average in all cases.

Investment intentions for the year ahead deteriorated, with spending plans for premises at their lowest since July 2009, and expectations for spending on new equipment also weakened.

Concern over labour shortages grew — from already high levels — but the employment figures saw strong growth, and hiring intentions for the following three months remain above the long-run average.

The survey also revealed that unit costs growth picked up compared with the previous quarter and was higher than output price inflation, indicating an on-going squeeze on manufacturers’ margins.

Rain Newton-Smith, CBI chief economist, said: “Growth in output and orders is still above historical norms, and it’s encouraging that plans for spending on innovation and training are holding their own.

However, we have seen a general ‘softening’ in manufacturing activity over the past three months, with the outlook for investment becoming more subdued.

“To boost investment growth, the Government should use the Budget to provide a fillip for factories through business rate reforms, including exempting new plant and machinery from rates altogether, and switching to the more recognised CPI inflation measure — rather than RPI — when calculating rate changes.”