Bad weather is likely to have played a role in dampening service sector activity in December, but the fact that incoming new business dropped for a second successive month suggests that underlying demand remains very weak and that activity may continue to fall in the new year.
The drop marked the first dip in the services sector since a snow-related decline in December 2010 and comes after disappointing construction figures yesterday.
Experts said the decline for the services sector, which makes up around 75% of total output, gives a clear signal that the economy went back into reverse in the final quarter of 2012.
Market economists said surveys across the services, manufacturing and construction sectors suggest Britain suffered its worst performance in the final three months of 2012 for more than three years, pointing to a 0.2% contraction in GDP.
This would come as a marked reversal of the 0.9% hike in the third quarter.