Firms and workers face a "frosty" winter with more job losses and plunging business activity, a leading economist has warned.

Data released by the Royal Bank of Scotland showed that the health of the private sector kept on deteriorating in October while staffing levels plunged for the fourth month in a row and at the most marked rate since February 2002.

Business activity plummeted to its lowest level in 11 years.

Volumes of new business declined at the steepest rate since the bank’s PMI South East Report was first published in January 1997.

The latest survey data suggests that levels of work-in-hand - but not yet completed - fell at a sharp rate during October and for the 20th month in succession.

At the same time, prices continued to rise, although the latest increase was the least marked since October 2007. South East private sector enterprises cited higher input costs as a key source of inflationary pressure.

Lower fuel prices may have accounted for the slight dip in cost inflation.

Ross Walker, UK economist at the Bank of Scotland, said: "The economic picture for the south east remained bleak in October, mirroring the retrenchment prevailing across the wider UK private sector.

"Both activity and new work fell at series-record rates, reflecting turmoil in the global financial system.

"Moreover, the outlook for future employment levels remains netative as there is extensive evidence of spare capacity in the region, with volumes of outstanding business being cleared at a sharp pace."

He added that survey data suggested that firms would continue trimming expenses in preparation for a winter in which "operating conditions are likely to turn increasingly frosty, as the economic downturn starts to bite."