Latest figures published yesterday indicate that the pressure on the UK services sector has intensified in the face of rising costs and falling demand. Firms in the sector, which includes hotel, pub, restaurant, stockbroking and financial services firms, cut jobs last month as they looked to reduce costs in the face of record oil prices and a sharp slowdown in business. A survey by the Chartered Institute of Purchasing and Supply (CIPS) showed its index of activity for the sector, fell to 47.1 in June - 50 marks the neutral territory between a growing and declining economy. It followed record declines in the manufacturing and construction sectors last month, but the contraction felt by services firms will cause most alarm. The sector is seen as the driving force of the economy, accounting for more than 70% of output. "This is one of the key indicators of the UK economy and the decline really does start to worry us that the economy will fall into recession,” said David Page of Investec Securities. Paul Smith, senior economist at Markit Economics, which wrote the report with CIPS, said: "Following on from the dreadful figures for both construction and manufacturing, the services report confirms the broad-based deterioration in UK economic activity. "The issues facing the service sector are rooted in the dual shocks of the financial crisis and surging oil prices. "Sentiment is down sharply and budgets are being eroded by escalating costs, with the net result in June the awful combination of a record fall in incoming new work and another survey-high rise in input costs." Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers in the UK services sector saw conditions deteriorate further in June as they battled against a combination of intensifying inflation and weakening demand. "Hotels and restaurants and financial services companies fared the worst with significant falls in new business. "Of particular note was the dramatic effect soaring oil prices had on firms' operating costs, with suppliers pushing up prices to offset the pain they are feeling from soaring fuel and energy costs."