More than a fifth of manufacturing firms are planning to lay off workers to cope with the costs of Brexit, according to a survey that suggests the sector is already losing business.

More than one in 10 (11%) of manufacturers say that they have already lost contracts, according to Chartered Institute of Procurement and Supply data shared with the Observer. Unions warned companies not to use Brexit as “an excuse to lay people off”. The figures have emerged as a group of cross-party MPs and peers hope to persuade the government to reconsider its determination to leave the European Union’s customs union – a move causing serious concern among manufacturing groups.

More than half of manufacturing companies (58%) said they planned to increase prices to offset Brexit, according to the survey of about 200 supply chain managers; 46% said they had already increased costs to customers in the wake of the Brexit vote. Some manufacturers are said to be trying to find suppliers in Britain to replace lost contracts overseas, known as “inshoring”. However, John Glen, a CIPS economist, said that it may not be a simple task and companies slow to act may not survive.

“It’s becoming clear that manufacturers can no longer absorb the costs of Brexit, and so the burden of higher prices is spreading to consumers, to suppliers, to clients and reshaping supply chains,” he said. “Though the sector has moved further towards inshoring, they’re likely to have difficulty finding suitable alternatives in the UK. Businesses that fail to plan ahead and use this opportunity to reduce their costs in supply chains may not survive.”

Stephen Phipson, chief executive of the manufacturers’ association EEF, said he was concerned that smaller companies were not preparing for a bad outcome from the Brexit talks.

“The more I speak to companies, the more I am concerned that there is a body of smaller and medium-sized companies that have no contingencies, or even thought being put into what happens in the event of the Brexit negotiations not going to plan,” he said. “Our overarching asks to government are to keep the conditions for trading as close to today as possible.”

Experts are warning that more EU businesses could start splitting away from their UK partners as Brexit approaches. “The government’s problem is that, as it becomes clear that the most we can hope for is a free trade agreement with the EU, more and more businesses reliant on pan-European supply chains will be forced into considering the viability of their UK operations,” said Sam Lowe, from the Centre for European Reform.

“The transition agreement serves the dual purpose of both buying time for the EU and UK to finalise an agreement, and time for businesses to repatriate their supply chains to the EU 27, if necessary. And the costs of doing so will in some cases be front-loaded on to the consumer.”

Frances O’Grady, the TUC general secretary, said: “Companies need to be honest with their workforces about the impact of Brexit. And not use it as an excuse to lay people off. But it’s clear that the government’s shambolic approach to Brexit is sending shudders through the UK manufacturing sector.

“It’s vital ministers work with unions and employers to protect jobs and key industries. The uncertainty is delaying investment decisions and leaving workers in limbo.”

Meanwhile, smaller EU nations have been trying to convince UK-based international companies to move operations to their countries. Jerzy Kwieciński, Poland’s minister of investment and economic development, was recently on a trip to the UK to win over businesses.

“It will not be the same situation for the financial sector after Brexit,” he said. “We do not expect that the big players will move their headquarters from London to Warsaw. But in order to be more efficient in the European Union, we think many financial institutions will want to have antennas somewhere in Europe,” he said.

“My conviction is that [Brexit] was a mistake. I think that you will see the effects. You have already got a slowdown in your economy at a time when the other economies in the EU are growing relatively well. Europe and Poland would have no problem if you changed your mind.”