LONDON (Bloomberg) — UK services shrank the most in at least 15 years in the three months through January as the recession deepened and companies from banks to hotels axed jobs.

The 1.3 percent fall was the largest since records began in 1994 and followed a 0.8 percent decline in the quarter through December, the Office for National Statistics said in London yesterday. The drop was led by business services and finance and hotels and restaurants.

The UK economy shrank a more than estimated 1.6 percent in the fourth quarter, the most in three decades. Bank of England Governor Mervyn King said last week that the contraction in the first quarter may be even sharper and chief economist Spencer Dale said short-term prospects were "bleak". Unemployment claims rose at the fastest pace since 1971 last month as companies shed jobs to cut costs.

"The increased fall in services output heightens fears that the UK economy could have contracted even more deeply in the first quarter of 2009," said Howard Archer, chief European economist at IHS Global Insight in London. "Demand for business services and finance is obviously being hit particularly hard by the recession."