The UK is falling further behind its international competitors in manufacturing and is now “treading water” in the global race for goods, unions warned yesterday.

A study by the Trades Union Congress (TUC) of industrial production figures since the end of 2010 showed the UK ranked fifth among G7 countries, with only Italy and Japan performing worse.

Industrial production has shrunk in every quarter since the start of 2011, even though the economy needs manufacturing and mining to grow to close the trade gap and become less dependent on financial services, said the union organisation.

The Chancellor was urged to use next month’s Budget to give more support to manufacturing.

TUC general secretary Frances O’Grady said: “The TUC agrees with the Chancellor that in order for the UK to compete, our economy must be less reliant on financial services and the South East.

“But the combination of demand-sapping austerity and failure to support British industry means that the UK is falling even further behind our major competitors.

“With demand for financial products understandably down on pre-recession levels, it’s more important than ever that we produce more goods, rather than relying on imports. Manufacturing and mining have never really recovered from the hammering they took in the 1980s. The Chancellor has a chance to put right the damage done by previous Conservative governments by making a bold commitment to support manufacturing again.”