LONDON (Reuters) - Britain's services sector contracted last month for the first time in five years, a survey showed yesterday, providing more gloomy news for Bank of England (BoE) policymakers as they begin this month's policy meeting.

The detail of the survey was particularly worrying: new business crumbled, confidence sank and employment in the sector - which makes up around three-quarters of the economy - fell at the sharpest rate since the survey began in 1996.

The economic newsflow over the past week has been unremittingly bleak: house prices are falling at their fastest rate since the early 1990s and Britain's manufacturing sector is stagnating.

Still, rising price pressures mean the Bank of England is widely expected to leave interest rates at 5 percent not just this week but for some months to come.

"The activity data is crying out for rate cuts but the inflation story is preventing that happening," said Brian Hilliard, chief UK economist at Societe Generale.

"Everything is pointing to sharp and painful economic slowdown."

A separate survey from the Nationwide building society showed consumer confidence fell further in May while a separate report highlighted fears that Britain's job market may be about to turn.