By William Schomberg

LONDON (Reuters) -British manufacturers reported the biggest fall in output since the COVID-19 pandemic in late 2024 and they are even more downbeat about the start of next year, according to a survey that adds to signs of a loss of momentum in the economy.

The Confederation of British Industry said a gauge of output over the three months to December in its monthly industrial trends survey – published on Wednesday – fell to -25, its lowest since August 2020, down from -12 in the three months to November.

Manufacturers’ expectations for output over the coming three months dropped to -31, the weakest since May 2020, from +9.

Other surveys have shown a loss of confidence among British employers after finance minister Rachel Reeves announced an increase in social security contributions that firms must pay on in her first budget on Oct. 30.

Official data has shown Britain’s economic output contracted in September and October in the run-up to the budget.

“Manufacturers are facing a perfect storm of weakening external demand on the one hand, amid political instability in some key European markets and uncertainty over US trade policy,” CBI lead economist Ben Jones said.

“And on the other hand, domestic business confidence has collapsed in the wake of the Budget, which has increased costs and led to widespread reports of project cancellations and falling orders,” he said.

The CBI’s measure of order books tumbled to -40 in December from -19 in November, the lowest since November 2020.

But expectations among firms for how much they will increase the prices they charge over the next three months rose to the highest since April at +23 this month, up from +11 in November.

The Bank of England expects Britain’s headline inflation rate to rise in 2025 but it has said it plans to cut borrowing costs gradually. Official data published earlier on Wednesday showed inflation rose to an eight-month high in November.

The CBI survey was based on the responses of 331 manufacturers and was conducted between Nov. 25 and Dec. 11.

(Writing by William Schomberg; editing by David Milliken)