Construction output fell by 3.3 per cent in July compared with the same period last year, with commercial dropping by 4.1 per cent.
Meanwhile public housing slumped by 12 per cent as government cuts took hold.
The latest figures from the Office for National Statistics show that construction output for July was £8.84 billion, compared with £9.14bn in July 2010. The figure is down from £9.09bn in June 2011. In July, new work made up £5.98bn, with repair and maintenance providing £2.85bn.
The latest figures come just a week after the ONS revealed that new orders in quarter two were at their lowest level for 30 years.
Noble Francis, economics director at the Construction Products Association, said: “Given that construction is around 10 per cent of GDP and economic forecasts continue to be revised down, this does not bode well for the economy in quarter three.
“Due to public sector spending cuts it is unsurprising to see that public housing output fell 12 per cent in July compared to a year earlier and public non-housing, covering education and health, fell 9 per cent.
“However, it is extremely concerning to see the key commercial sector – the largest construction sector – falling 4.1 per cent and industrial factories and warehouses construction fell 20 per cent, reflecting the economic uncertainty.”
There were more positive signs in private housing and infrastructure output, which were both higher in July than a year earlier, at 4.9 per cent and 7.8 per cent respectively. However, both were down compared to June, by -4.8 per cent and -8.6 per cent.
The ONS has also revised Q2 in terms of constant prices from 0.5 per cent up to 1.1 per cent. It said this increase is due to “the receipt of new deflator information, seasonal adjustment and additional data returned by businesses”.
Steve McGuckin, UK Managing Director of the global construction consultancy Turner & Townsend, said: “In many ways, the contractors are now feeling the pressure that consultants went through a year or two ago.”
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