The services purchasing managers' index (PMI) posted a surprise jump in September, but firms gave a bleaker outlook. Other surveys indicated that unemployment is set to rise, while second-quarter GDP data on Wednesday showed growth was weaker than previously thought as consumer spending slumped.

Pressure on British consumers was also laid bare as top retailer Tesco posted one of its biggest-ever quarterly falls in underlying sales and rival J Sainsbury reported only modest growth.

In response to the data, Britain's Finance Ministry said Britain could not insulate itself from the turbulence in the euro zone, where governments are struggling to contain the Greek debt crisis and prop up banks. But the government reiterated its determination to stick to austerity plans aimed at erasing a huge budget deficit.

The Markit/CIPS services purchasing managers' index rose to 52.9 in September from 51.1 in August, bouncing back from its biggest one-month fall in a decade and moving away from the 50 line that separates growth from contraction.

Sterling rose against the euro and the dollar while gilt futures extended losses as the PMI dampened speculation the BoE may launch a fresh round of quantitative easing at its meeting on Thursday.

However, economists said the case for more asset purchases was still in place.

"I doubt it changes the underlying perceptions of where the UK economy is heading — a decent month, yes, but overall I think it probably doesn't change the idea that the Bank of England will probably do more QE in either November or December," said Marchel Alexandrovich from Jefferies International. "It is pretty anemic growth."

Britain's faltering recovery has increased pressure on the government to boost growth as households suffer their worst squeeze in over 30 years, inflation nears 5 percent, and unemployment rises.

Prime Minister David Cameron was set to warn Britons at the Conservative Party's annual conference that the road back to economic health will be long, but that the budget deficit did not allow extra spending.

In an attempt to boost confidence, Chancellor of the Exchequer George Osborne on Monday announced a scheme to funnel lending directly to companies starved of credit by banks.

While businesses and many economists applauded the idea, such a scheme would be more a medium-term help for small- and medium sized firms than a quick fix for the economy's woes.

The government is banking heavily on private firms to offset the sharpest cuts in public spending in generations as it tries to rebalance the economy away from credit-fuelled consumption toward investment and export-driven growth.

But business lobby groups warned the risk of a renewed recession had risen and called on the Bank of England to act.

"Hopefully we can still avoid a slide back into recession but it's getting scary," said Graeme Leach, chief economist at the Institute of Directors.

"Even without further intensification in the euro-zone crisis, the weakness of the economy makes the recovery highly sensitive to precautionary behavior by companies and consumers. If the euro-zone crisis does intensify, a return to recession looks inevitable," he said.

The services figure follows hot on the heels of a PMI survey that showed a return to growth by the manufacturing sector, and Markit said it estimated that British economic growth had picked up to 0.4 percent in the third quarter, based on surveys of manufacturers, services and construction firms. 

Britain's economy grew by a dismal 0.1 percent in the second quarter, according to downwardly revised ONS data on Wednesday, which showed consumer spending dropped 0.8 percent on the quarter, the largest fall since the first quarter of 2009. 

"The rise in the PMI index in September ... may persuade the Bank of England to hold off before implementing any further stimulus at its October meeting," said Markit economist Chris Williamson. "But the case is not clear-cut, as forward-looking indicators from the PMI survey suggest that we may see further softness in the final quarter of the year."

The services PMI showed that firms' expectations for the next 12 months are their most depressed in two-and-a-half years, with this component sinking to 63.5 from 65.1.

And the third quarter of 2011 was overall the worst so far this year for the private sector non-retail service industries covered by the survey, undermining hopes that it would mark the end of a year of very little growth.

A survey for the Recruitment and Employment Confederation showed that recruitment agencies reported the slowest increase in permanent placements in over two years in September.