CHINA’S economic slowdown and increasingly cautious consumers have forced the services sector into a two-and-a-half year low.

A new report suggests growth in the industry dropped to levels not seen since April 2013 last month.

According to the Markit/CIPS purchasing managers’ index (PMI), the sector, which includes banks and high street restaurants, suffered in September, as total business activity rose at its slowest pace for 29 months.

New work sank to the same level, with companies’ longer-term outlooks falling to lows not seen since August last year.

The report gave a reading of 53.3, compared to 55.6 in August, which means the industry is still above the 50 figure used to separate growth from contraction.

However, the results come after previous PMI reports revealed manufacturers’ job creation was at a two-and-a-half year low and construction companies’ new orders had risen at their weakest pace for five months.

Chris Williamson, chief executive of Markit, which compiles the survey, said the slowdown may continue for a while.

He said: “The rate of economic growth slowed to a two-and-a-half year low in September, suggesting the economy sank further into a soft patch at the end of the third quarter.

“Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular.

“There are also signs consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels.

“Wider business service sector confidence has also been knocked by global economic worries and financial market jitters.

“At the moment, sustained strong hiring in services and construction suggests companies are generally expecting the slowdown to be short-lived.

“But with the three PMI surveys collectively recording the weakest inflows of new business for two-and-a-half-years, there’s a strong likelihood the slowdown could intensify in coming months.”

David Noble, group chief executive at the Chartered Institute of Procurement and Supply, said businesses were also wary of the impact of China’s lethargic economy.

He added: “The further softening of growth in the services sector must now be causing some concern for the sustainability of the recent recovery in the UK economy.

“Respondents pointed to reluctance from clients in placing contracts, and their faith in business buffeted by a global economy suffering from sluggish activity.

“It appears when China sneezes the world catches a cold, as some companies cited the region as a cause for worldwide concern.”