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(Bloomberg) -- The UK economy is in recession with the downturn expected to worsen heading into 2023, a key survey warned.

S&P Global said its poll of purchasing managers suggests the economy is shrinking at a quarterly rate of 0.4%. Gloom was widespread in November, with services firms seeing new business fall at the fastest pace for almost two years.

Companies blamed their plight on the cost of living crisis caused by runaway inflation and rising interest rates, which is leading consumers and businesses to cut back on non-essential spending. For manufacturers, Brexit constraints and the global downturn are also hampering exports.

“A further sharp fall in business activity in November adds to growing signs that the UK is in a recession, with GDP likely to fall for a second consecutive quarter in the closing months of 2022,” said Chris Williamson, chief business economist at S&P Global.

“If the pandemic lockdown months are excluded, the PMI for the fourth quarter so far is signalling the steepest economic contraction since the height of the global financial crisis in the first quarter of 2009. Forward-looking indicators, notably an increasingly steep drop in demand for goods and services, suggest the downturn will deepen as we head into the new year.”

The warning follows bleak assessments of the outlook from both the Bank of England and the Office for Budget Responsibility. Both see the recession persisting through next year, with the BOE raising the possibility of further weakness in 2024 if it forced to raise rates aggressively to bring inflation back to target. On Tuesday, the OECD predicted the UK will underperform other major economies for two years.

Across the economy, key PMI gauges remained below the 50 level that divides expansion from contraction, though the figures were slightly stronger than economists were expecting.

Services and manufacturing were unchanged from October at 48.8 and 46.2, respectively. A composite index ticked higher to 48.3.

Services providers increased employment, but manufacturers shed jobs, choosing not to replace leavers due to the lack of new work coming in. Costs and prices meanwhile rose at a slower pace than in October, easing pressure on the BOE to keep delivering bumper rate increases.

Business expectations improved from a 30-month low in October, driven by the services sector. Fewer firms cited domestic political uncertainty following the collapse of the Liz Truss government, whose unfunded tax cuts triggered market turmoil. Her successor as prime minister, Rishi Sunak, last week announced big tax rises and spending cuts in an attempt to restore confidence among investors.

“While the recent change of government has resulted in improved business confidence, the business mood remains among the gloomiest seen over the past quarter century amid the numerous headwinds, which include the cost of living crisis, the Ukraine war, steepening export losses (often linked to Brexit), higher borrowing costs, fiscal tightening and heightened political uncertainty,” Williamson said.