Service sector activity fell in December, according to the latest CIPS/Markit UK services Purchasing Managers’ Index.

After accounting for seasonal factors, the headline Business Activity Index posted a reading of 49.7, down markedly from 53 in November. The reading was below the 50 no-change mark for the first time since April 2009, pointing to a marginal decline of service sector output.

The index reveals that activity and new business both fell in December, while job losses were recorded for third month in a row.

Chris Williamson, chief economist at Markit, says: “A very disappointing end to the year in the service sector matches a similar deterioration in the construction sector. With manufacturing the only sector still expanding, the economy as a whole stagnated in December, taking GDP growth in the final quarter down to around 0.4% – a far cry from the 1.1% growth spurt seen in the spring.

“Looking ahead, further weak economic growth should be expected in early 2011 and the drop in services activity, alongside the decline in construction, is a warning that manufacturing alone is unable to sustain the economic recovery.”