SMEs are predicting a decline in the number of domestic orders, according to a survey by business experts.

Findings from the Confederation of British Insurers (CBI) reveals that up to 78 per cent of SMEs believe that a lack of orders will restrict growth in the first quarter.

Overseas orders, which helped SME output growth increase in the last three months of 2007, are thought to flatten while domestic business drops.

Russel Griggs, chairman of the CBI's SME council, says: 'Though smaller manufacturers enjoyed the best overseas demand in over 12 years last quarter, and last week's interest rate cut will provide some relief, uncertainty about the future is growing across the sector.'

He adds that smaller businesses are struggling to absorb rising costs despite increasing prices.

Up to 30 per cent of SME manufacturers report that costs have gone up during the last quarter with 29 per expecting them to rise again.

Meanwhile, the European Commission has launched a new $700 million (£521.3 million) initiative called the Enterprise Europe Network, to support business proposals from smaller firms.