British manufacturers are fast approaching a “tipping point” where a lack of certainty over the direction of Brexit negotiations will force them to make painful cuts whatever the outcome, they say.

The stark warning, due to be delivered on Tuesday by Engineering Employers’ Federation chief executive Terry Scuoler, comes as business leaders begin a week of crunch meetings with government ministers to try to force the pace of thinking over how to ensure economic stability when Britain leaves the European Union.

A small group of chief executives met with chancellor Philip Hammond at the CBI president’s dinner on Monday, where he was expected to reassure them that the government was listening afresh to the fears of business since the general election. Both the CBI and EEF are among five employers’ groups also due to restart talks with Hammond, Brexit secretary David Davis and business secretary Greg Clark at the government’s Chevening country house on Friday.

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But business leaders are increasingly concerned that a lack of clarity over how they will retain access to European markets and employees is already holding back growth and could become critical long before the two-year Brexit negotiation phase finishes.

“UK businesses need to know soon what arrangements will be in place after March 2019, to be able to plan, make investment decisions and have confidence that an orderly and carefully managed approach to Brexit is under way,” Scuoler will tell an audience in Strasbourg on Tuesday. “If they don’t have that assurance there will come a tipping point, sometime in 2018, when boards in the UK and elsewhere will need to make decisions based on the state of the negotiations at that point.”

The latest data from the UK automotive sector already points to a dramatic slowdown in this key industry since the referendum. Figures compiled by the Society of Motor Manufacturer and Traders suggest investment announcements are now running at a quarter of the annual rate seen two years ago.

“[Manufacturers] cannot wait until the end of the process for confirmation of a deal on our departure or future trading relationship,” Scuoler is due to warn the president of the European parliament, Antonio Tajani at the meeting in Strasbourg. “They need to know much sooner what transitional arrangements will be in place, and for how long. A failure to do so will damage our collective economic interests, a situation which would be as tragic as it would harmful.”

His plea comes as a poll of manufacturers suggested uncertainty had hit domestic demand for their products last month. Export demand was also weaker despite the pound’s drop against other currencies since the Brexit vote, which has made UK goods cheaper for overseas buyers.

Growth for the sector slipped to a three-month low as manufacturers suffered a slowdown in both output and new orders, according to the latest IHS Markit/CIPS Purchasing Managers’ Index. Its barometer of manufacturing activity dipped to 54.3 in June from 56.3 in May. That was below forecasts for 56.3 in a Reuters poll of economists.

But the index was still well above the 50 mark that separates growth from contraction and the average reading for the second quarter as a whole was the best for three years.

Rob Dobson, a senior economist at the survey’s compilers, IHS Markit, said June’s health check showed new business rose at the weakest pace for nearly a year.

“This slowdown was largely centred on the domestic market, where increased business uncertainty appears to have led to some delays in placing new contracts. Export orders remained disappointingly lacklustre despite the ongoing competitiveness boost of the weak sterling exchange rate,” he said.