Growth in Britain’s service sector virtually ground to a halt last month, fuelling fears that a widespread slowdown is taking hold in the economy.

The closely watched CIPS survey of business activity in the service sector fell from 52.1 in March to 50.4 in April, the lowest figure since March 2003. Any figure under 50 indicates declining activity.

The service sector, which includes hotels, restaurants and banks, accounts for about two thirds of the UK’s economy. The data came as evidence emerged of a further deterioration in the housing market.

Bovis Homes, one of the country’s biggest builders in the South of England, gave warning on profits after announcing a 30 per cent slide in sales. It blamed the seizure in the mortgage market as it revealed that the number of buyers reserving a new-build property had nosedived in recent weeks. Bovis received deposits on 1,382 homes in the first four months of this year, down from 1,979 last year. The company has received only 80 reservations from buyers since mid-March — traditionally the bumper spring selling season.

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Malcolm Harris, chief executive of Bovis Homes, said: “The mortgage market has virtually frozen up. The second-time buyer market has frozen as they have to sell to a first-time buyer.

“People [are] reserving with us then finding they cannot get a mortgage. A lot of banks are withdrawing first-time-buyer mortgages.” Bovis’s warning came after a decision ten days ago by Persimmon, Britain’s most valuable housebuilder, to stop building on new sites until market conditions improved as it also announced a sharp slowdown in orders for new homes.

Mr Harris said that over the past three months he had been forced to cut some sales prices in Cardiff Bay by 10 per cent.

Also yesterday HBOS, Britain’s biggest mortgage lender, said that it would stop lending to landlords investing in new-build properties unless they had a deposit worth at least 25 per cent. In yet another indication that mortgage lenders are losing confidence in the housing market, the bank has reduced the maximum lend from 85 per cent to 75 per cent of a property’s value, amid fears that brand new homes, especially city centre flats, are set to suffer a steep decline in value.

Rightmove, the property website, said that the outlook for the housing market in Britain was “very poor” and that the high numbers of closures of estate agents ultimately would hurt its business.

The gloom will pile pressure on the Bank of England’s Monetary Policy Committee, which starts its interest-rate meeting today, to cut rates in a bid to boost activity.

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