BRITAIN'S manufacturing sector saw the level of activity slump to its lowest for more than two and a half years last month.

According to the latest monthly survey by the Chartered Institute of Purchasing and Supply (CIPS), activity fell from 47 points in July to 46.4 in August.

On the CIPS scale, a number above 50 indicates growth, while a number below indicates contraction.

CIPS said the manufacturing economy, which is now officially in recession, had now contracted for the sixth consecutive month and had recorded its lowest level since the beginning of 1999.

Economist Philip Shaw, at Investec bank, said: "The numbers are slightly worse than we expected. The numbers can be a bit volatile, but the overall picture of the manufacturing sector is that it remains in recession and there is no visible upturn as yet."

Simon Rubinsohn, chief economist at stockbroker Gerrard, said the report made for "gloomy reading". One worrying aspect was that it showed a steep decline in export orders despite a drop in the value of sterling against the euro over the month. In addition, the survey provided no encouragement on profits margins, he said.

"Given the lack of any real evidence that the US is on the mend and the indications that the picture in the Eurozone is, if anything, still deteriorating, it is not really a surprise that the recession in manufacturing continues to deepen."

Economists agreed the figures did not change their opinions that the Bank of England's monetary policy committee will keep interest rates on hold at five per cent this week.