CBI IN ECONOMIC SLOWDOWN WARNING

Its quarterly service sector survey found consulting, accounting and legal services firms enduring the worst decline in business volumes and values since 1998.

A balance of 25% of professional services firms also reported lower profits since May - the biggest since February 2002 - with employment falling for the first time in four years.

The CBI said its survey showed the difficulties first encountered in consumer-facing areas such as travel and hospitality spreading across the wider sector, which accounts for around three-quarters of the economy.

The gloomy survey come days after official figures showed the UK economy ground to a halt for the first time in 16 years, with zero growth between April and June.

Many experts now predict recession - two successive quarters of economic contraction - in the second half of 2008.

The CBI's economic adviser Ian McCafferty said profitability in the service sector was "clearly under pressure".

"This pressure, initially confined mainly to consumer services such as hospitality and travel, has now spread to the professional and business services sector, covering areas such as marketing and legal services.

"This reflects much tougher trading conditions for business and professional firms, after a period when business trends had been holding up in the face of the slowing economy," he added.

Business and professional services firms are also more worried over inability to raise financing for investment since the credit crunch struck, the survey showed. A balance of 22% - the highest since 1998 - expressed their fears over funding, while expectations for business expansion were also the weakest on record.