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Britain’s economy today appeared to be edging closer to recession after Ford introduced a four-day working week at one of its production plants and UK manufacturing shrank at its fastest rate since the last slowdown in the early 1990s.

Ford blamed the “tough economic climate” for a decision to cut 17 working days at its transit van plant in Southampton between now and the end of the year.

Staff at Land Rover’s Solihull plant have also been informed that production will be stopped on Friday, with only 4x4 vehicles being produced.

Workers at Ford and Land Rover have been told they will still be paid for shifts on the days when production is halted.

It also emerged today that the manufacturing sector is facing its toughest conditions since Britain's last recession in 1992 after activity in September fell for a fifth consecutive month.

Today’s economic data will add to pressure on the Bank of England’s Monetary Policy Committee (MPC) to cut the interest rate in eight days' time when it meets to vote on borrowing costs.

Economists had expected a cut in the interest rate in November but now expect that MPC could reduce borrowing costs by a quarter point to 4.75 per cent on October 9, after the Office for National Statistics confirmed yesterday that the UK economy failed to grow in the second quarter.

The stagnation raised fears of contraction in the third quarter and the beginning of recession in the UK.

Today, a key survey by the Chartered Institute of Purchasing and Supply (CIPS), which measures the activity in the manufacturing sector, fell to a record low of 41.0 in September.

CIPS said today that September data indicate that "UK manufacturers are currently facing the toughest operating conditions" since the survey began in 1992.

Domestic demand for manufacturers' goods was particularly affected by the downturn in the credit, housing and construction markets, which led to an increase in customers cancelling or delaying orders.

At the same time, new export business dampened overseas business, with activity in September falling to a seven-year low.

The CIPS survey also revealed that employment levels are suffering because of the slowdown in manufacturing. The employment index showed a reading of 40.1, indicating that companies are laying off staff and choosing not to replace departing workers.

On the upside, the price of producing goods fell in September from a reading of 78.1 in August to 73.7 as the declining price of oil and commodities fed though to input cost inflation. However, input inflation remains high and above the survey's average.

Howard Archer, chief UK and European economist at Global Insight, described the figures as “simply awful.”

He said: "Weakening productivity in the first half of 2008 is yet more disappointing news for Gordon Brown and Alistair Darling, as the Government has placed high importance on boosting UK productivity."

Mr Archer added: "Clearly, the further marked slowdown in productivity in the second quarter of 2008 was influenced significantly by GDP only stagnating as well as by companies holding on to workers.”

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