UK business activity drops at fastest pace in two years as cost rises bite

High energy prices, rising interest rates and falling demand point to risk of recession, say analysts

Business activity contracted at its fastest pace in two years in December as the high cost of living restricted household spending and companies cut investment, raising the prospect of a UK recession.

The services sector, which accounts for about three-quarters of private sector output, faced the biggest squeeze since the second Covid-19 lockdown, according to a closely watched survey. A slump in manufacturing output dating back to last August continued in December.