The pound fell as low as $1.5369 , its weakest since early August 2013, leaving it down 1.4 percent on the day, its steepest fall in four months.

The monthly survey of UK purchasing managers (PMI) showed the manufacturing sector expanded at a much slower pace than expected in December. Other data showed lending to British consumers surged at the fastest rate in almost a decade in the three months to November.

Taken together, the figures suggested Britain's upturn, one of the strongest among advanced economies in 2014, will remain biased towards consumption rather than other sources of growth such as investment and exports.

The data highlighted "a very lopsided recovery, the result of which is a widening external imbalance, and that hurts the currency," said Alvin Tan, a currency strategist at Societe Generale.

Sterling has shed over 10 percent since hitting a six-year peak just below $1.72 in July, as investors have pushed back bets on when the BoE will start raising interest rates.

Friday's data only served to push those expectations further into the future, with many in the market betting the bank rate, which has stood at 0.5 percent since March 2009, will not be raised this year .

"What we have in the Bank of England is a central bank that will not look to even think about raising interest rates until it has very good reasons to do so," said Neil Mellor, a currency strategist at Bank of New York Mellon. "I think sterling's going lower for 2015."

Mellor also highlighted the risk to the currency from a general election in May, which could open the door to an eventual British exit from the European Union. That would be a "huge negative" for sterling, he said.

Conservative Prime Minister David Cameron has promised, if re-elected, to hold a referendum on Britain's membership in 2017.

Against the euro, sterling fell 0.7 percent to trade at 78.21 pence .

The single currency plumbed a 4-1/2-year low against the dollar, having been hit by an interview with a German newspaper in which European Central Bank chief Mario Draghi underlined the ECB's readiness to take bolder action to loosen monetary policy early this year, should it be necessary.

(Editing by Mark Trevelyan)

By Jemima Kelly