Services industry contracted for the third month in a row in July and new business in the sector shrank to a 12-year low as hotels and restaurants suffered from the credit crunch.
Services activity was 47.4 on the Chartered Institute of Purchasing and Supply's (CIPS) Services Purchasing Managers' Index, where anything below 50 marks a contraction, and above marks an increase.
The figure shows that activity fell at a slower rate in July compared with June, when it was 47.1, and was slightly above analysts' consensus forecast, but commentators warned that there was little room for optimism, as falling employment in the sector would likely feed through to a sharper rise in the official unemployment figures.
The Chancellor Alistair Darling offered no comfort today when he told the BBC: "There is no doubt that what is happening now is far more profound and will be more prolonged than people thought 12 months ago when this problem first arose.”
rising inflation hit intended investment and spending levels.
Roy Ayliffe, CIPS director, said: "Purchasing Managers in the UK services sector saw the clouds of pessimism gather as providers continued to struggle with further record falls in new work and soaring food, fuel and utility prices."
