The worrying finding marked the first decline in the capital’s business activity for over two and a half years.
The business activity index slipped to a reading of 49.3 in November, down from 50.4. Scores below 50 indicate economic contraction.
“Spare capacity prompted firms to reduce their staff numbers at the fastest rate in two years,” commented Neil Mahoney, Lloyds TSB regional director.
“A further rise in new business was the only bright spot in November, but the rate of growth was only modest.”
Despite the capital’s index falling below the no-change line, output growth was still recorded across the UK as a whole, according to Lloyds TSB and Markit, which compiles the data.