The UK's dominant service sector saw activity drop for the first time in two years in December as new business tailed off.

The latest figures increase the likelihood that the UK could slide into a 'triple dip' recession.

The services sector figures follow an equally disappointing construction survey for December, leaving manufacturing - which accounts for just 10% of the economy - as the only bright spot.

Chris Williamson, Chief Economist at Markit, which complies the figures, said the surveys were consistent with the economy contracting by around 0.2% in the fourth quarter.

"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," he warned.

Markit's Purchasing Managers Index recorded 48.9 in December, down from 50.2 in November, with the 50.0 no-change mark separating growth from contraction.

The latest data marked the first fall in services since a snow-related dip in December 2010.

A reduction in incoming new business was the principal factor behind the fall in activity.

Businesses noted a general reluctance among clients to commit to new business spend, especially at a time of relative economic uncertainty.

Budgets were reportedly being tightened, with cost control also said to be a prominent factor putting the squeeze on spending.

December's decline followed a similarly sized drop in November and marked the first back-to-back contractions of new work in the sector since mid-2009.

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