The crisis in the manufacturing sector deepened today after official figures showed the sector contracted at an "alarming" pace in January.

The Office for National Statistics (ONS) said manufacturing output fell 12.8% on a year earlier at the start of 2009, the biggest decline since 1981 and much bigger than the already gloomy forecasts of City commentators.

In the latest three months, output fell 6.4%, down from minus 4.9% in the fourth quarter and the most severe contraction since records began in 1968.

Economists said the latest figures heightened fears that the UK could be set for another hefty fall in GDP in the first quarter of this year. Economic output was down 1.5% in the fourth quarter of 2008.

The UK manufacturing sector has been battered by depressed domestic demand, weak activity in key export markets and tight credit conditions, offsetting any benefit from the weak pound against the euro and US dollar.

Howard Archer, IHS Global Insight economist, said: "The industrial sector is suffering a real hammering globally, and UK manufacturers are taking their fair share of this."

The ONS's wider measure of industrial production, which includes mining and quarrying, fell 2.6% in January - against forecasts of minus 1.2% - to leave the year-on-year rate at minus 11.4%.