S&P Global’s composite Purchasing Managers’ Index slipped to 46.8 in September from 48.6 the month before, the sharpest decline in output since January 2021 when the UK was in lockdown. The reading was worse than economists expected and plunged the private sector deeper into contraction territory.

S&P also said there had been an “abrupt turnaround” in the jobs market, with staff cuts the fastest since October 2009 excluding lockdowns during the pandemic.

The closely-watched survey adds to concerns that the UK is heading into downturn. The measure signaled a second straight month below the 50 threshold separating growth and contraction. However, more signs the labor market is loosening adds to confidence that the Bank of England’s fight against inflation is gaining traction.

“A recession is looking increasingly likely in the UK,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “A major concern in the inflation outlook has been wage growth, but with the survey now signaling the sharpest fall in employment since 2009, wage bargaining power is being eroded rapidly.”

S&P said that private sector business activity fell at the steepest pace since March 2009, aside from the pandemic. Businesses blamed the cost-of-living crisis and higher interest rates for the subdued demand.

While the economy is weakening, there was more evidence of inflation cooling. Input price inflation saw its biggest monthly fall in 2023 so far.