Construction output fell by 0.5 per cent in the last quarter of 2011, according to the latest figures from the Office for National Statistics.
The ONS said construction sector output decreased by 0.5 per cent, compared with an increase of 0.3 per cent in the previous quarter.
Total UK GDP decreased by 0.2 per cent in the fourth quarter, worse than the 0.1 per cent expected and sparking fears of a double dip recession.
As well as the construction fall, there was a 0.9 per cent fall in manufacturing and a 4.1 per cent seasonal drop in electricity and gas production.
However, Chris Wiliamson, chief economist at Markit, which provides data to the purchasing managers’ index for the Chartered Institute of Purchasing and Supply, said: “It is important to remember that first estimates of GDP must be taken with a large pinch of salt. In the decade starting 1998, one-in-three initial estimates have ended up being revised up or down by at least 0.5 per cent.
“So we could quite feasibly see this contraction revised away in later releases, especially as business surveys suggest that the economy stagnated in the final quarter of last year, with economic growth accelerating in December.
“The huge uncertainty is the Eurozone, and a worsening of the region’s debt crisis remains the single biggest threat to the UK economy.”
Noble Francis, economics director at the Construction Products Association, said the prospects for the future are grim, with construction expected to fall a further 5.2 per cent during 2012, “exacerbating the problems in an industry that has already lost 300,000 jobs, and severely hindering growth for the economy as a whole”.
Mr Francis said: “Undoubtedly the problems in the eurozone have increased uncertainty in the private sector making investors highly risk averse to investment.
“However, this does not tell the whole story as capital investment from the public sector, which accounts for more than one third of total construction activity, will have fallen 30 per cent by the end of 2013.
“As construction has been highlighted by government as essential for recovery, the decline is severely harming prospects for the sector as well as constraining overall economic growth.”