It found 43 out of 96 companies believed that margins would worsen over the next quarter while 26% said that the state of orders was worse than normal the highest level since October 2004.

"Some firms are turning things around," said the report's author and economist David Ross. "But more are finding it increasingly tough."

Reasons for this included the rise in energy and raw materials costs.

"Volumes are not too much of a problem for the industry but it is about making them profitable," added Ross.

Some 40% of companies were found to be working below capacity.