Builders are rocked by worst-ever slowdown

Construction firms suffered their worst month on record in May as they were hit by the housing market downturn.

The Chartered Institute of Purchasing & Supply today said activity in the sector fell at the fastest pace since its survey began in April 1997. Housing activity was "particularly depressed" last month, while office development stalled.

Subcontractors endured a torrid month as business dried up. CIPS blamed "unfavourable economic conditions", and said a number of projects were delayed.

Meanwhile, digger firm JCB warned that falling demand for its construction equipment in North America was spreading across the Atlantic as the credit crunch bites.

"The outlook is very difficult," said chief executive Matthew Taylor. "The mixed bag of prospects across the world makes forecasting this year's sales very hard."

The Bank of England yesterday said mortgage lending slumped to a new low last month, raising fears that the slowdown in the housing market could be sharper than expected. However, it is likely to leave interest rates at 5% on Thursday.

Roy Ayliffe, director of professional practice at CIPS, said the housing sector was being worst-hit by the effects of the credit crunch.