The slowdown in Eurozone business activities intensified in January as the pandemic continued to batter the economy, a key survey showed on Friday.
The closely watched PMI index compiled by IHS Markit is considered the earliest indicator of the state of the economy and the latest reading confirmed fears that the year-old virus crisis is still going strong.
France was among the hardest hit Eurozone nations, with the news coming amid concerns over the country's vaccine roll-out being slower than others.
Much hope has been put in the distribution of vaccinations to reopen the economy but the campaign in the EU is going at a slower pace than hoped.
Meanwhile in Britain, that left the EU on January 1, the relapse into a third national lockdown has sparked the sharpest drop in business activity since May, with services companies hit hardest, according to the survey.
The series of damaging lockdowns have been largely due to the spread of a more contagious strain of the virus.
A preliminary 'flash' UK Composite Purchasing Managers' Index (PMI) fell to 40.6 in January, down from 50.4 in December, in the survey announced Friday.
However, Britain's vaccination programme has been rolled out at a much faster rate than countries on the continent, partly thanks to its ability to avoid European red tape since Brexit, that is holding others back.
In the UK, 8.01 vaccine doses have been administered per 100 people, as of January 22. In contrast, France has seen just 1.26, Germany 1.67 and Spain 2.36.
'A double-dip recession for the eurozone economy is looking increasingly inevitable as tighter Covid-19 restrictions took a further toll on businesses in January,' Chris Williamson, chief business economist at IHS Markit, said.
This meant that the economies of the 19 countries that use the single currency, dominated by Germany and France, would sink back into recession after only a very short recovery over the European summer.
The firm's closely watched PMI index fell from 49.1 points in December to 47.5 points this month, further away from the 50-point level which indicates growth.
Williamson noted however that the bad start to 2021 would be less damaging than the economic collapse seen in the first wave of the pandemic last year.
This was due to the 'ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year,' he said.
The difference between France and Germany was notable.
German exports managed to keep the country narrowly on a growth trajectory, while French business activity sank.
The situation for the rest of the eurozone, accounting for a little more than half of the bloc's economy, was even worse.
Worryingly, employment across the eurozone fell for an eleventh consecutive month, albeit with modest increases in France and Germany, IHS Markit said.
The bleak picture confirmed a warning by European Central Bank chief Christine Lagarde who saw 'serious risks' still looming over the eurozone economy.
The rollout of vaccines had instilled 'a strong degree of confidence' but 'the recent rise in virus case numbers has caused some pull-back in optimism,' Williamson said.
Britain's relapse into a third national COVID-19 lockdown has sparked the sharpest drop in business activity since May, with services companies hit hardest, a survey showed on Friday.
The drop below the 50 threshold for growth was bigger than any economist forecast in a Reuters poll, which had pointed to a reading of 45.5.
In addition to the latest lockdown, data company IHS Markit said Britain's post-Brexit shift to a more bureaucratic trading arrangement with the European Union had contributed to the decline.
'Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports,' Chris Williamson, chief business economist at IHS Markit, said.
The pace of job losses accelerated, after easing in December.
Economists polled by Reuters last week forecast a 1.4% fall in output for the first quarter.
The official death toll from COVID-19 in the United Kingdom is nearing 100,000 and is currently the highest in Europe and the fifth worst in the world after the United States, Brazil, India and Mexico.
Britain is rolling out vaccines faster than many of its peers, which should bode for a swift economic rebound later this year.
Thursday's survey showed companies were upbeat about their business prospects for the year ahead, with optimism hitting a 6-1/2-year high.
The PMI for the services industry, which accounts for the vast bulk of Britain's private sector economy, fell to 38.8 in January from 49.4 in December, its lowest level since May and marking a third month of contraction.
Factories fared much better, despite fading growth in output and a renewed decline in order books. The manufacturing PMI fell to 52.9 in January from 57.5 in December, remaining above the 50 dividing line for growth.