Smaller manufacturers are being forced to raise prices sharply by the toughest cost pressure in more than 20 years, the CBI says.

Rising input costs have come at the worst time for small and mediumsized businesses, which are seeing global demand for their goods fall.

Plans to invest in plant and machinery have weakened since January. Investment in buildings has improved slightly, but remains weak.

A CBI survey shows that in the three months to April, 51% of respondents had seen average unit costs rise and been forced to pass on the increases at the factory gate. Only 7% in the survey, published just hours before official factory gate prices data, said prices had fallen.

The balance of plus 43% is the strongest in more than 20 years, driven by much higher energy and raw material costs. Export prices grew more slowly but were much stronger for medium-sized firms.

The volume of export orders fell, in spite of the weaker pound, with a balance of 11% reporting a drop. Medium-sized firms' orders fell at their fastest rate since April 2002.

Russel Griggs, chairman of the CBI's SME Council, said there were some encouraging signs. "Smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July."