The pound yesterday plunged to an all-time low against the euro, with the single currency jumping as high as 81.4p, as ever-increasing signs of UK economic weakness kept sterling on the ropes.

The pound yesterday plunged to an all-time low against the euro, with the single currency jumping as high as 81.4p, as ever-increasing signs of UK economic weakness kept sterling on the ropes.

Gloomy comments about the economy from Chancellor Alistair Darling dealt sterling a bodyblow, as did figures yesterday from the Bank of England showing yet another drop in UK mortgage approvals for house purchase to a fresh record low.

The pound was also hit by a bleak survey of UK manufacturing from the Chartered Institute of Purchasing and Supply, showing this sector contracted sharply again in August, and by a gloomy housing market report from residential property infor- mation provider Hometrack.

Darling said, in a news-paper interview published on Saturday, that the conditions facing the UK economy "are arguably the worst they've been in 60 years".

He added: "And I think it's going to be more profound and long-lasting than people thought."

The pound yesterday fell through $1.80 for the first time since April 2006, falling as far as $1.7985. It was last night trading around $1.8008 - nearly two cents weaker than its pre-weekend close against the US currency.

The euro, launched in January 1999, yesterday morning burst through the previous record high of 80.97p which it had set against the pound in April. It then ran up nearly half-a-penny past this former peak to 81.4p. The single currency was last night trading around 81.11p - up half-a-penny on its close against the pound in London on Friday.

Sterling's continuing tumble will make countries in the 15-nation eurozone ever-more expensive for UK visitors. But it should help UK exporters compete in these key market-places.

Sterling has been hammered in recent sessions by a raft of gloomy economic data. Its 8.6% fall against the dollar in August was its worst monthly showing against the US currency since October 1992 - following the pound's ignominious exit from the European Exchange Rate Mechanism .

On its trade-weighted index against a basket of currencies, the pound is at its lowest level for nearly 12 years.

The Office for National Statistics heightened fears of recession in the UK on August 22 by revising gross domestic product figures for the second quarter to show no growth at all in the three months to June 30. A growing number of economists is predicting that the UK will fall into recession - defined as two consecutive quarters of falling output - in the second half of this year.

David Blanchflower, the dove on the Bank of England's Monetary Policy Committee, added to sterling's woes last week by forecasting UK unemployment would rise to two million by Christmas on the International Labour Organisation measure. This would be a rise of about 330,000 from the number for the three months to June - the latest available.

The Bank of England's lending figures yesterday added to the mounting pile of gloomy indicators for the UK housing market. These seasonally-adjusted data showed the number of fresh loans approved for house purchase in the UK fell for a 12th straight month from 35,000 in June to 33,000 in July - the lowest since the data series began in 1993.

Howard Archer, chief UK economist at consultancy Global Insight, said: "(These are) yet more very disturbing mortgage data that heighten concerns over the potential depth and length of the housing market correction."

Noting July's approval number was "the lowest level since comparable records began in 1993 and down a massive 71.1% year-on-year from the July 2007 level of 114,000", he added: "Housing market activity continues to be throttled by stretched affordability and ongoing very tight lending conditions, and (the data) point to further marked falls in house prices over the coming months.

"We suspect that whatever measures the government announces to try to help the housing market, it will only have a very limited impact in stabilising the sector, particularly given current very negative housing market senti-ment, likely extended weak economic activity and rising unemployment."

Global Insight predicts UK house prices will fall by 15% in 2008 and 12% in 2009.

The Bank of England said UK mortgage lending, a more historic indicator than approvals, rose a net £3.2bn in July. This was way adrift of the average £5.6bn rise in the preceding six months and only marginally above June's very weak £3.1bn increase.

Unsecured consumercredit rose £1.1bn in July, less than the previous six-month average rise of £1.3bn but greater than June's £900m increase.

Hometrack's survey showed house prices in England and Wales fell in August for an 11th straight month - dropping a further 0.9% to be 5.3% weaker than a year earlier.

Gilts and interest-rate futures rose as sterling fell, with all of these movements reflecting a growing belief the MPC will have to cut UK base rates from 5% by the year-end. The MPC is expected to stand pat when it concludes its next two-day meeting at noon on Thursday.