Small contractors will not feel the full force of the downturn for at least a year, after which insolvencies are expected to peak.

Jonathan Hook, head of construction and engineering at Pricewaterhouse Coopers, said that he believed the nadir for smaller firms was “one to two years away”, by which time the current lack of bidding activity would have trickled down the supply chain.

Hook said firms with a turnover of up to £300m were most at risk. He said: “Some will be well funded and well run so should be okay. But there will be many within the £10-300m bracket that will come under pressure.”

In its last figures, published in August, PwC said insolvencies in the supply chain had risen 35% on a year ago.

There will be many within the £10-300m bracket that will come under pressure.

Jonathan Hook, PwC

The warning comes as statistics from the Federation of Master Builders (FMB) show that output has continued to fall. Workload balances in the third quarter were negative across all sectors, with private housing the hardest hit. More than 60% of respondents reported lower workloads compared with the previous quarter, and more than 55% of respondents reported lower industrial workloads.

The organisation has suggested a five-point plan to kickstart activity: making existing homes more energy-efficient, reducing VAT on maintenance, simplifying the planning system, abandoning the community infrastructure levy and reforming stamp duty.

FMB director of external affairs Brian Berry said: “The situation is deteriorating at an alarming rate and the government needs to take urgent action.”