An index based on a survey of more than 600 manufacturers by the Chartered Institute of Purchasing and Supply dropped to 44.3 in July, the lowest since December 1998, from 45.9 the previous month. The U.K. currency extended its drop after British Energy Group Plc, the nation's biggest nuclear-power producer, rejected a takeover approach from Electricite de France SA, according to people with knowledge of the talks.
The pound slipped to $1.9781 by 12:42 p.m. in London, from $1.9841 yesterday, bringing it weekly drop to 0.8 percent. The British currency was at 78.72 pence per euro, from 78.64, gaining 0.2 percent in the week.
The U.K. currency will slide to 82 pence per euro and $1.96 by the end of the March, before recovering, Karpowitz said.
Retail visits fell 2.6 percent from a year earlier, Experian Group Ltd. said today in an e-mailed report. The company forecasts sales volumes in the next 12 months will be ``the slowest period since the early 1990s,'' according to the report.
Bank of England policy makers left the nation's key interest rate unchanged at the past three meetings even as inflation accelerated to the fastest pace in 11 years. Prices rose 3.8 percent in June from a year earlier, almost double the central bank's 2 percent target. The bank next meets Aug. 7.
The pound has fallen 6.7 percent against the euro this year as tumbling house prices and accelerating inflation slowed the pace of growth.
The prospect of higher interest rates receded in the past month, with the implied yield on the December short-sterling futures contract at 5.76 percent today, from 6.21 percent a month ago. The contract rose 5 basis points today.
Britain's economic outlook has deteriorated in the past month after ``bad news'' on retail sales, Bank of England policy maker David Blanchflower, the only official to vote for a rate cut this month, said two days ago. U.K. house prices fell the most in nearly two decades in July and consumer confidence dropped to a record, reports showed yesterday.
Other reports this week showed mortgage approvals fell to the lowest since at least 1999 and an index of U.K. retail sales dropped to a 25-year low, house prices declined the most in almost two decades and consumer confidence slumped to a record.