The squeeze on household incomes saw the UK's consumer services sector deteriorate in the last quarter at its fastest rate since 2009, as the service sector of the economy continued to weaken, the Confederation of British Industry said.

The business and professional services sector slowed at a lesser rate than expected, but suffered “a sharp drop in confidence”, according to Ian McCafferty, the CBI’s chief economic adviser. He blamed “developments in the eurozone and heightened uncertainty over global prospects”.

The quarterly survey, conducted between October 28 and November 16, covers 189 companies from law firms and accountants to hoteliers and leisure groups. In consumer services, a negative balance of 41% of firms saw volume fall, against expectations of only -1% and the fastest since May 2009, while value fell at the fastest pace since February 2009, with the -49% balance disappointing expectations of +7%.

Firms said the level of activity was well below normal in both measures, and optimism about the general business situation was lower than three months ago at a -23% balance. Both volume and value of business are expected to decline further, though at slower rates, in the current quarter.

The number of people employed also fell, though slower than expected. But employment is expected to fall more strongly next quarter. In business and professional services, business volume and value fell less strongly than in the three months to August, with balances of -6% and -12% respectively (previously -22% for both). But firms said they regarded the volume and value of business as well below normal and they were less optimistic about the general business situation than they were three months ago.

Mr McCafferty said: “Business conditions are worsening ... this is yet more evidence of people with squeezed household incomes being forced to cut back on their discretionary spending.”

Meanwhile, the British Chambers of Commerce has cut its forecasts for UK economic growth. It now says growth will be “minimal” until mid-2012 and reach 0.8% in total – down from its previous estimate of 2.1%. It has cut its 2013 forecast from 2.5% to 1.8%.