We are heading into the worst peacetime economic slump since the 1930s, according to the latest forecast by the highly regarded ITEM Club.

This marks a massive collapse in hope for the UK economy. Just three months ago the ITEM Club's autumn 2008 forecast carried the sub headline "...the recession in the wider economy should not be severe".

The latest forecast paints a very different picture. It suggests that unemployment will rise to 3.25 million and house prices will fall a further 22% over 2009 and the first half of 2010.

It also points to fixed investment dropping by a further 15.7% this year and another 4.3% more in 2010. That's more than twice as bad as the autumn forecast suggested.

So where would that leave construction? For simplicity's sake, let's just use the past participle of the "F" word.

That is, unless we see massive state intervention far beyond that which we have so far seen.

What gives the ITEM Club more clout is that it uses the Treasury's own forecasting model.

And on the face of it this is among the very worst economic forecast out there at present for the UK.

Before going further, it may be worth reflecting on the severe shift in position with the ITEM Club's latest forecast. It would be too easy to dismiss the experts as fools given the size of the revision.

But to be more generous, I have long held the view that one of the purposes of a forecast is to be wrong, particularly bleak forecasts.

With respect to fatalists, my take is that we do have the ability to change the future. So, if a forecast suggests our current course will lead to disaster we have the option of changing direction.

Certainly if we don't and if reality plays out anywhere near to the projects presented it will mean at the very least extreme pain in some areas of the construction industry, notably those associated with housing investment - new build and refurb.

However, some optimists in the construction industry (with huge reservations I would include myself) may see hope springing from this prognostication of doom.

Increasingly construction is being seen as part of the solution. Yes there is muddleheaded thinking within a Government that clearly doesn't really understand the subtleties of the industry. And certainly it appears to have about as much grip on the housing market as Teflon-soled shoes on ice, if the comments from Margaret Beckett reported in the Sunday Times are correct.

But it does see the value in boosting building with funding from the public purse during this period of slackening private sector demand.

Now all we need from the Government is more accuracy in the direction of spending, a greater appreciation of the scale of investment needed and, significantly, more urgency.

My fear greatest concern is that the Government will remain behind the curve.

Yes, it is critical that the Government expend effort repairing the banking system, but the problems are now well entrenched in the "real" economy, particularly the house building industry. A more strident set of policies earlier would have staved off much of the damage so far caused.

That is a past mistake. The issue now is not to repeat it.

Fingers crossed...