Growth in the service sector is stalling and the number of companies shedding jobs has risen sharply as worries over the economic outlook lead their clients to cut spending, according to a survey closely watched by policymakers.

The Chartered Institute of Purchasing and Supply and NTC, the research group, yesterday said their index of service sector activity fell from 50.4 to 49.8 in May, the first time in five years it has dropped below the threshold of 50 that indicates stagnation.