* Manufacturing PMI shows jobs, output cut at record pace
* EEF says 140,000 skilled workers to lose jobs this year
* British mortgage lending rises by less than expected
By Fiona Shaikh and David Milliken
LONDON, March 2 (Reuters) - British manufacturers slashed jobs and output at a record pace in February and the sector faces its biggest downturn since 1980, according to two surveys released on Monday.
The CIPS/Markit purchasing managers' survey showed plunging demand drove companies to cut output and jobs at their fastest rate since the survey began in 1992.
It also led to a drop in factory gate prices for the second time in three months and at the sharpest rate in seven years.
Meanwhile, the Engineering Employers Federation (EEF) said the decline in output will cost 140,000 skilled workers their jobs this year.
The EEF's manufacturing trends survey for the first quarter of 2009 showed a marked decline in activity since the end of last year and suggest policymakers' expectations that a weaker pound will boost exports may be too optimistic.
Manufacturing accounts for around 13 percent of a British economy in which the services sector dominates.
The surveys reinforced expectations the Bank of England will cut interest rates by half a percentage point this week to a record low of 0.5 percent, as policymakers prepare to start increasing the supply of money to boost the economy.
"The renewed deterioration in the February manufacturing purchasing managers' survey from already very depressed levels reinforces belief that UK economic contraction remains very sharp, while substantially contracting orders, backlogs of work and employment bode ill for future activity," said economist Howard Archer of IHS Global Insight. "This adds to the pressure on the Bank of England to take further imminent action to boost economic activity, both through trimming interest rates further this Thursday and through engaging in quantitative easing," he added.
HOUSING MARKET WOES
Hit by the fallout from the global credit crisis and slumping domestic asset values, Britain is in recession for the first time since the early 1990s.
The economy shrank by 1.5 percent in the last three months of 2008 and unemployment is just shy of two million. Figures released on Monday by the Bank of England highlighted the restrictive lending conditions being endured by consumers and suggest the housing market will remain in the doldrums for some time to come..
British mortgage lending rose by much less than expected in January and approvals for home loans held near a record low, in a sign that house prices may have much further to fall.
The Bank of England said net mortgage lending rose by 690 million pounds ($983.7 million) in January, less than half analysts' forecasts for an increase of 1.5 billion pounds and much lower than December's 1.794 billion pound rise.
The number of home loan approvals held steady at 31,000 in January, not far off a record low and against forecasts for a modest increase to 32,000. (Writing by Keith Weir; Editing by Andy Bruce)