The EEF said 2015 was tough for industry, with the sector beaten back by a challenging global economy.
The organisation revised down its growth forecasts to a contraction of 0.1 per cent for the year.
It is forecasting a slight recovery of 0.8 per cent for the sector in 2016.
Andy Tuscher, regional director, said: “Looking at 2016, early indications are that we face more of the same, with the global picture expected to remain fairly unchanged or potentially even slightly worse.
“Risks are expected to become more prominent, but manufacturers are a tough and resourceful bunch. While fully aware that the year ahead will be tough, companies are still eyeing up growth opportunities.
“Their main focus will be on investing in technology and innovation, finding and selling into new export markets and working closely with customers and suppliers to ensure supply chain flexibility.
“Innovation will also drive diversification. We are already seeing oil and gas supply chain companies looking to diversify into other sectors – it’s only reasonable to expect that companies in the metals sector will look to follow suit.
“But at the same time, there will also be a little more caution.”
He said the Government’s withdrawal of funding for carbon capture and storage sent a warning to those eyeing up opportunities presented by the UK’s climate change targets, reducing the appetite for firms and investors to get involved in green projects.