The downturn in the economy worsened this month as the services sector recorded its fastest drop in activity since January 2021, according to the closely watched S&P Global/CIPS Flash Purchasing Managers’ Index (PMI).

The survey of 650 manufacturers and 650 service providers showed that growth was lower than expected and was at a level not seen since financial collapseapart from the pandemic months.

Scores below 50 on the index indicate economic reduction.

While 48 was expected, UK manufacturing output came in at 45, a 29-month low.

The economic downturn was recorded in several categories. Both the PMI business activity index and the composite manufacturing index were at their lowest for 21 months.

According to Chris Williamson, chief economist at S&P Global Market Intelligence, the data showed that the pace of the economic downturn had increased due to “recent political and financial turmoil in the market.”

“Increased political and economic uncertainty has caused business activity to fall at a rate not seen since the global financial crisis in 2009, excluding months of pandemic lockdowns.”

The result is likely to be a recession, he said. “Therefore, GDP is certain to fall in the fourth quarter after likely contracting in the third quarter, meaning the UK is in recession.”

The survey showed that business confidence had fallen to a level “rarely seen in the 25-year history of the survey”, he added.

“As night follows day, investment and employment will suffer in the coming months as companies adjust to an increasingly challenging environment. Hiring is already slowing dramatically, and manufacturing is now even laying off workers.”

Inflation remained higher than at any time in the survey’s history before the pandemic. Despite falling consumer demand, a weak pound and high energy costs, inflationary pressures are likely to push the Bank of England to further aggressive interest rate hikes, Mr Williamson said, which would increase borrowing costs.

“In addition to the collapse of political stability, stress on financial markets and falling confidence, these higher borrowing costs will add to speculation of a worryingly deep recession in the UK.”