British manufacturing output shrank for the fifth month in a row in July, the longest decline in seven years, highlighting fears that the economy is heading into a full-blown slowdown.

Official figures show that manufacturing output, which accounts for 15 per cent of the UK economy, fell by 0.2 per cent between June and July and was 1.4 per cent lower compared to last year.

The economy ground to a halt in the second quarter of the year, and last week the Organisation for Economic Cooperation and Development (OECD), the influencial think-tank, forecast that the UK would fall into recession in the second half of the year.

The OECD expects that the UK GDP will shrink for two successive quarters, which is the technical definition of a recession.

Analysts said that manufacturers are being hit by muted domestic demand, higher prices and weakening activity in key export markets.

Howard Archer, chief UK and European of Global Insight, the economic consultancy, said that while the weakening pound was boosting exports, it was being "countered by significantly slowing growth in the eurozone and a stagnant US economy."

Overall industrial output fell by 0.4 per cent in July, pushing the annual decline to 1.9 per cent on the back of lower oil and gas extraction output.

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