UK manufacturing output will drop for the first time in three years according to new forecasts from manufacturers’ organisation EEF.

The group has predicted a 0.6% decline in manufacturing output throughout the UK for the year, as issues surrounding the Eurozone crisis burden trade and exports. It is the first time the sector has shrunk since 2009.

Lee Hopley, chief economist at EEF, said: "The estimate for second-quarter growth is again unlikely to flatter the UK’s economic performance. But the bigger question is where we go from here. Our forecast scenarios show the importance of bringing greater confidence and certainty to the private sector. The re-balancing process would be kick-started if firms were to push ahead with investment plans.

"But our forecast also shows the risks from another big shock such as a Euro break up or significant deterioration in credit conditions for firms and households. Either event would knock the economy for six once again and further delay the onset of any green shoots of recovery."

Looking ahead, EEF said prospects would improve in 2013 driven by exports which are set to increase by 4.1% in the next 12 months because of markets outside of the European Union.

The group said the manufacturing sector is likely to stabilise in the second half of the year, with gross domestic product (GDP) "returning to a modest quarterly growth".