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Britain's Brexit-battered economy has started to shrink for the first time since the country voted to quit the EU in 2016, new figures signalled today.

They show the services sector — about 80 per cent of the economy — grinding to near “stagnation” as businesses shelved investment amid Brexit uncertainty and growing fears of a no deal.

Steep falls in the performance of the construction sector and manufacturing offset a modest rise in services, according to purchasing managers’ index figures from IHS Markit.

Its chief business economist, Chris Williamson, said the June services figures were “one of the worst performances seen over the past decade”.

He added: “Collectively, the PMI surveys indicate that the economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the global financial crisis in April 2009.

“The June reading rounds off a second quarter for which the surveys point to a 0.1 per cent contraction of GDP. Risks also remain skewed to the downside as sentiment about the year ahead is worryingly subdued, suggesting the third quarter could see businesses continue to struggle.”

The services sector recorded a figure of 50.2 last month, which is below City expectations. A figure below 50 means the sector is contracting.

Some economists believe the drop in the overall size of the economy in the three months to June will be bigger, possibly 0.2 per cent, though some of this is believed to be due to the unwinding of stockpiling built up to prepare for the planned March 29 departure date from the EU.

But MPs warned that the figures showed the economic risks facing Britain, particularly with Boris Johnson and Jeremy Hunt, the Tory leadership candidates, both saying they are prepared to crash the country out of the EU in order to deliver Brexit.

Former universities minister Sam Gyimah said: “This is a salutary warning that we can’t take economic growth for granted. Of all the options available to us, for the Government to choose the most extreme, a no-deal Brexit that it knows will harm people’s livelihoods, would be reckless, irresponsible and unforgivable.”

Shadow chancellor John McDonnell said: “This will spark yet more concern about the serious damage being caused by the Tory mismanagement of the economy and the threat of a disastrous no-deal Brexit.”

Brexit-backing MPs argue that the economy will be revived once the UK leaves the EU.