"There is simply no sugar-coating the outlook for next year and possibly beyond," said Stephen Phipson, chief executive of Make UK. "These are remarkably challenging times which are testing even the best and most successful of companies to the limit."

Make UK welcomed recent government support, which includes 18 billion pounds ($22 billion) of energy bill subsidies for businesses across the economy as a whole, but warned that more may be needed soon. The energy subsidies stop at the end of March.

"The bigger issue is that the UK risks sleepwalking into an acceptance that little or no growth is the norm. Government needs to work with industry as a matter of urgency to deliver a long-term industrial strategy," Phipson said.

The trade body said it wanted a temporary relaxation of immigration controls, lower property taxes and greater tax incentives for training and investment.

Make UK, which says it represents 20,000 companies ranging in size from start-ups to multinationals, forecasts the broader economy will shrink 0.9% next year, less than the 1.4% decline forecast by the government's Office for Budget Responsibility last month.

The most recent official data shows that manufacturing output in September was 5.8% lower than a year earlier.

Make UK said the scale of the fall in output that it was estimating for 2022 partly reflected an unusually strong performance in 2021, when there was a bounce back in demand after the pandemic.

($1 = 0.8148 pounds)