According to BDO's Services Optimism Index, sentiment across the sector is at 95.49, less than half a point above the 95 mark that indicates a "recessionary mindset" has begun to set in.
The 3.89 drop in services sentiment from the previous month also led to a 3.21 drop in the overall Optimism Index for August, which at 96.26 was down 5.27 year-on-year.
BDO partner Peter Hemington described the dramatic drop in August as "a very worrying event" and pointed out that pessimistic businesses tend to hold back on investments and hiring, "which is how recessions start".
The reason for this dip in confidence, Hemington said, was businesses had suddenly awakened "to the fact that a no-deal Brexit is a real possibility".
Hemington recalled a similar collapse in confidence in the wake of the 2010 elections, and a subsequent low growth period during the “sudden realisation that austerity wasn't going to be pretty".
Optimism also seems to have affected hiring, as BDO reported a 0.26 drop in its Employment Index since last month and a 2.24 decrease from 114.74 year-on-year.