The service sector of the British economy contracted 0.4 per cent in the quarter to the end of September, in the biggest contraction since 1990, according to data published on Wednesday.

Meanwhile, consumer spending saw its sharpest decline for 13 years between July and September, the Office for National Statistics (ONS) reported. Household spending fell 0.2% in the three months to the end of September after falling 0.1 per cent in the three months to the end of June. The figures come two days after Alistair Darling, chancellor, unveiled a £20bn fiscal stimulus to combat recession which cut VAT to 15 per cent in a bid to encourage shoppers to spend more money.