A sharp rise in the number of companies in trouble poses new evidence that the US economic slowdown is spreading to the UK.

The boys in red braces and white socks trade on the bad news

Fears of a recession rose as an index revealed that the number of companies issuing profit warnings, cutting back investment, announcing redundancies or showing other signs of being in difficulty rose 18.4% last month from July.

The index, compiled by Mandis Information Services from a database of 100,000 companies, indicated that there are more companies in trouble at the moment than at any point since November 1998, the Sunday Times reported.

The gloomy index was published after the UK's FTSE 100 index of leading shares slipped below 5,000 on Friday for the first time since November 1998.

"The boys in the red braces and white socks are trading on the bad news and ignoring the good," the head of policy at the Institute of Directors, Ruth Lea, was quoted by the Sunday Times as saying.

"I sold all my shares in the summer and I fear that it is going to be a long way down."

Troubles spread

Trouble in the hi-tech sector has spread beyond the telecoms and computing arenas in recent months to old economy manufacturing firms.

Can the UK pull clear of a recession?

And recent signs suggest that the service sector is about to suffer too, creating a gloomy outlook for the UK economy.

In the world of finance, the culling of jobs has already started with City firms admitting they have cut 3,000 jobs so far this year.

That figure is set to grow sharply as more jobs are axed.

In fact, there are even reports that the true figure is already much higher.

A Sunday Business investigation said many City firms have under-reported the true extent of the job losses so far this year, quoting sources who believe the true figure could be in excess of 9,000 jobs.