A reading above 50 indicates expansion, but below 50 indicates contraction.
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The figure confirmed an earlier flash estimate of service sector output.
The monthly drop of 4.9 points was the biggest since the survey began in July 1996, Markit said.
Business magazine, Caixin, said its gauge of manufacturing activity – the so-called purchasing managers’ index – rose to 50.6 from June’s 48.6 on a 100-point scale on which numbers above 50 show expansion.
Data released by the same agency on Monday showed that India’s manufacturing activity was at a four month high with manufacturing PMI edging up to 51.8 in July from 51.7 in June.
IHS Markit’s chief economist Chris Williamson said Wednesday that the increase, which was driven by the eurozone’s largest economy, Germany, was “especially encouraging as it suggests the region saw little overall contagion from the U.K.’s “Brexit” vote”.
“Separately, the depreciation of the rupee supported Indian exporters as survey data pointed to the quickest rise in new business from overseas since January”, she said.
“While there is little to suggest an imminent turnaround in business conditions, a relief factor appears to have softened the fall in business optimism among United Kingdom construction companies”.
Costs in the manufacturing sector surged to a five-year high last month, ‘reflecting a sterling-induced rise in import costs and higher metal and commodity prices’.
“Services providers are certainly bracing themselves for worse to come, with a record drop in business confidence about the year ahead leaving optimism at its lowest ebb since February 2009”.
Figures released last week showed the United Kingdom economy grew by 0.6% in the three months to the end of June.
Housebuilding also fell sharply and for the second straight month, “but at a slightly slower pace than in June”, Markit said. After both stabilized this spring, the index increased but recently took a hit with the decision of voters in the United Kingdom last month to leave the European Union.
Next (NXT.L), one of Britain’s biggest clothing retailers, reported a pick up in sales in its second quarter on Wednesday and said it had not so far seen a big impact on demand from the European Union vote although the fall in sterling would push up its costs.
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Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said data from the PMI suggests support from the weaker pound is simply not powerful enough to offset a drop in domestic demand.
