It found that two-fifths of small manufacturers plan to develop new products, just under one-quarter intend to expand into new sectors while a similar number are considering new markets.

However, the survey of 73 businesses found notable obstacles to the plans, with 95% of firms reporting that the viability of their business was being challenged by fuel prices and 88% cited transport costs as a problem.

There were also concerns about supply chain pressure, such as reduced demand, late payment and pressure from larger firms to cut prices.

The FSB said that manufacturing businesses have been particularly affected by difficulties in accessing finance to expand or simply keep going.

Andy Willox, the FSB's Scottish policy convenor, said: "The rising cost of transport and fuel is squeezing many in business and manufacturers are no exception. However, they also face additional pressures piled on by supply chain problems and late paying customers."

The FSB report, Small Businesses in Manufacturing, found that 48% of small manufacturers export their products but this brings problems with it. Mr Willox said: "Only half of our small manufacturers export.

"Those who don't point to a perceived lack of international demand or simply don't think it is right for their businesses. Those that do point out that currency fluctuations and long payment periods can make life difficult."

Around 90% of manufacturers are small businesses with fewer than 50 employees.

Those that manufacture non-essential items such as yachts or confectionary reported more challenging trading conditions than others, the report found, due to increased raw material and distribution costs or the unwillingness of customers to take price increases.

Manufacturers of industrial goods said that after an initial fall in demand at the onset of the recession, demand had levelled out.

The conditions seem to be encouraging changes in behaviour with some companies switching their emphasis to delivering services for their products, which do not require the same capital investment as new product lines.

Others have been seeking to cut costs by going directly to end customers.

Only 9% of manufacturing members were recruiting staff at the end of 2011.

The main reasons for not hiring included difficult trading conditions and a lack of potential employees with the appropriate skills.