The risk that Britain is entering its third recession in four years grew yesterday with figures showing that manufacturing shrank unexpectedly last month and mortgage approvals for home-buyers dropped in January.

Gross domestic product fell at the end of last year, bringing Britain within sight of another recession, and the latest data suggested the central bank may need to do yet more to revive the economy. The pound sank to its lowest level against the dollar in more than 30 months, while prices of British government bonds – which the Bank of England could resume buying – rose after the releases.

The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell to 47.9 from a downwardly revised 50.5 in January, confounding forecasts for a rise to 51.0.

It was the first reading below the 50 line that separates growth from contraction since November.