The UK is at risk of slipping into recession, according to a closely watched survey of industry managers.
The dominant services sector grew only slightly in August, the purchasing managers’ index (PMI) from IHS Markit/CIPS suggests.
“The lack of any meaningful growth… raises the likelihood that the UK economy is slipping into recession,” said IHS economist Chris Williamson.
The construction and manufacturing sectors also shrunk in August.
The services sector accounts for 80% of the UK economy.
According to IHS’ survey, the sector barely expanded in August, achieving a score of 50.6 – down from 51.4 in July. Anything above 50 marks growth, while a lower number indicates a contraction.
However, the figure including manufacturing and construction was 49.7, the second contraction for the private sector in three months.
IHS Markit said Brexit uncertainty and higher business costs were to blame.
“While the current downturn remains only mild overall, the summer’s malaise could intensify as we move into autumn,” added Mr Williamson.
Between April and June the UK’s economy contracted for the first time since 2012. A recession occurs when the economy contracts in two consecutive quarters.
According to IHS Markit, UK firms are hiring and taking on new clients at a slower pace as they try to gauge whether the government will quit the European Union without a deal at the end of October.
Service-based firms, which include hotels, restaurants, banks and insurers, are also seeing profit margins squeezed by rising staff wages , fuel costs and utility bills, the survey found.