Service sector activity has weakened to its lowest level since 2001, and lenders are still tightening credit conditions for both households and businesses as fears over the economic outlook replace liquidity concerns, data showed on Thursday.

The Chartered Institute of Purchasing and Supply and Markit, the research group, said their index of activity in the service sector that drives the UK economy fell from 49.8 in May to 47.1 per cent in June, the worst reading since October 2001.