All respondents to the survey, which replaced BPIF Directions last year, reported that they were working below capacity, with 10% operating at a loss during the three months from December to February.
Andrew Brown, corporate affairs director of the BPIF, said the findings were the worst since the 1991 recession.
He added: "The troubled economy is uppermost in printers' minds and it is with little surprise that the vast majority of firms surveyed believe that conditions will either remain the same (44%) or indeed worsen (42%).
"You have to go back to 1999 for the last time that more printers predicted deterioration than improvement during the spring."
Despite rising raw material costs, 61% of respondents cut prices over the last quarter compared with just 2% that raised them.
Profit fell in turn with just 5% reporting double-digit profit growth, compared with 18% three months earlier.
Brown described the cost cutting as "worrying". He said: "Overcapacity is a key issue and people are taking desperate steps to get the work in.
"Printers have to be looking at ways to add value to their offering and become more of a strategic partner to their clients."
According to PrintWeek research, 10 print companies with a turnover of more than £5m have failed this year, reflecting the challenges the market is facing.
Of these, seven have been partly or totally resurrected without debts, many in a pre-pack deal, and perpetuating the capacity issues the market faces.
Brown said that pre-packs had contributed "quite a lot" to the overcapacity in the market.
"It is a real headache but there is not a lot you can do about it," he said. "The administrator is usually in a situation where there is only one group to sell the business to."
He added that he understood the "frustration" felt by rivals and suppliers.
Interestingly, the survey found that more than 90% of printers expected to invest in their plants and machinery in the coming 12 months, with increased efficiencies the primary motive behind an investment.
Results in brief:
- State of the trade
78% said trade had worsened over the past quarter, 5% improvement - Orders and output
56% printers said production had dropped, compared to just 5% saying it had risen - Capacity
87% of printers surveyed operated at between 60-87% of capacity, none at 100% - Margins
55% suffered a narrowing in margins, with just 1% reporting an increase
