Shares in Bradford & Bingley (B&B), the struggling bank, plunged nearly 20 per cent today as London's leading stocks lurched into a bear market on escalating fears that the UK is careering towards a recession.

B&B, which is Britain's biggest buy-to-let mortgage lender, saw the value of its shares fall by 17.26 per cent to 34.75p as investors dumped stock over concerns about the bank's future and the board's management of the company.

The bank is struggling to raise £400 million to boost its capital position, and its shares are now trading at 37 per cent less than the 55p at which B&B will offer its stock when it launches a rights issue for the funding.

Investors are furious that B&B's board, led by executive chairman Rod Kent, refused to allow Resolution, an investment vehicle that had the backing of some of bank's largest shareholders, access to its books.

Resolution was hoping to run the company and had secured an agreement with some of B&B's largest investors to pump £400 million into the bank.

B&B's board preferred to go ahead with a deal to sell a stake to TPG, a US private equity firm. However, within a fortnight, TPG pulled out of the deal.

While B&B's stock reached new lows, the FTSE 100 index of Britain's leading shares plunged by 134.2 points to 5378.2 this morning, 20 per cent below October's peak, amid growing concerns for the global economy.

The FTSE 100 rebounded slightly just after midday, falling just 62.9 points to 5, 498.8.

The British Chamber of Commerce (BCC) said today that activity in the services sector, which accounts for three quarters of the UK's economy, had fallen to levels not seen since the recession of the early 1990s.

The BCC, which surveyed 5,000 companies ranging from restaurants to cinemas and accountants to architects, reported that their sales, orders and confidence have sunk to the lowest levels since the last downturn.

It also emerged today that the number of UK mortgages granted during June had slumped by 44 per cent compared with last year, according to the Council of Mortgage Lenders.

The number of people remortgaging also fell, down 14 per cent compared with May and 23 per cent lower than in June 2007.

Persimmon, the British housebuilder, today blamed falling mortgage numbers for its decision to cut 2,000 full and part-time jobs, when it revealed home completions had fallen by 31 per cent and revenue by 34 per cent in the first six months of this year.

Persimmon's cuts brings the jobless toll in the British housebuilding construction sector to 4,500 in recent weeks.

Last week, Barratt cut 1,000 staff and Taylor Wimpey, the UK's largest housebuilder by volume, said it was axing 900 jobs.

Galliford Try, the construction group, recently confirmed it was cutting 256 jobs in its housebuilding division in response to the weaker property market, while Ballymore, the residential and commercial developer, said it was cutting 50 jobs - more than 10 per cent of its workforce - as part of a management shake-up.

Against this backdrop, the Bank of England will announce on Thursday whether it will keep interest rates at 5 per cent or raise borrowing costs to curb inflation, which, last month, soared to 3.3 per cent.

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