Tourism, leisure and airport-related projects have already been hit. Manchester Airport has postponed a number of building projects and BAA is reviewing all its construction plans, including the £2bn Terminal 5 development at Heathrow – the UK's biggest building project. "Every single capital project, both under way and planned, is being assessed, and then we will decide whether to defer them," said a BAA spokesperson.
Tourism has also taken a pounding as people have stayed out of the skies. The UK industry, already suffering from the foot-and-mouth epidemic, is expecting the number of visitors from abroad to fall a further 20% in the wake of the terrorist atrocities. Two international hotel operators, Accor and Park Place Entertainment, have put development plans on hold, and the gloom could soon spread to other sectors, according to Alastair Stewart, a construction analyst at Credit Lyonnais Securities.
"Any development that relies on consumer confidence will come under pressure," he said. "The outlook was not good anyway, but this has crystallised things. It will probably bring recession."
Even before the attacks in New York and Washington, there were signs of a cooling off in the office market. Two weeks ago, Canary Wharf Group announced it was putting all future speculative office developments on hold because of the unclear economic outlook – a decision it said had been taken before 11 September.
Last week, construction share prices fell further than the market average as investors absorbed the potential impact on orders. The Building 50 index of leading construction firms fell 13.7% - almost double the 7.5% fall in the FTSE 100 index.
Kevin Cammack, analyst at Merrill Lynch, says construction is taking a hammering because it always fares badly at such economically shaky shaky times. "Look at the experience of the Gulf War – the sector does have a record of performing badly at a time of crisis," he says. "It is always a fear that the first casualty will be asset- or property-based."
Cammack also thinks that construction stock's recent strength means investors would be quick to offload them during a share-price tumble. "To go for an area that has had quite sizeable near-term growth is the easiest thing to do," he explains, and construction is not a short-term option.
The crisis could mean the £2bn Terminal 5 project for Heathrow, already in limbo for four years, could be delayed even further. Pressure groups campaigning against the terminal are arguing that reduced passenger numbers leave the project redundant. They are now asking transport minister Stephen Byers to push back a decision once again.
Another question now is whether BAA can afford to build T5 at all. The airport operator is dependent on landing fees for income, and a downturn in air travel could affect its ability to fund such developments. The board has been holding emergency talks and BAA had asked the Civil Aviation Authority, the air travel regulator, to allow it to increase landing fees to fund T5. The CAA was due to announce a decision on 28 September, but has postponed the announcement for one month.
BAA says it is too early to predict how its projects will be affected. "Clearly the situation is serious, but we don't know what the long-term implications will be," says a BAA spokesperson. "We're still committed to building Terminal 5."
Any development that relies on consumer confidence will come under pressure
Alastair Stewart, construction analyst, Credit Lyonnais Securities
Last week, British Airways, now running with debts of £6.4bn, said it was prepared to sell and lease back its entire £2bn property portfolio. This would include Waterside, the company's headquarters and its Fitzpatrick Hotel in New York. And having already laid off 7000 workers since the tragedy, it is doubtful that BA still needs the extra space it has pressured for for so long.
Manchester Airport has responded swiftly to the reduction in flight traffic by putting small building projects on ice. It says: "We will be deferring projects worth under £1m for at least two months, to decide which schemes might be affected."
The airport intends to continue with its £1bn, 15-year construction programme, although, like BAA, Manchester admits it cannot predict the long-term effects of the terrorist attacks.
But the knock-on effect ripples further still, as tourists stay at home, fearful of air travel. Two international hotel operators have slashed development plans, and occupancy in London, already 20% down since the crash, is expected to fall further. Last week, Accor, the world's third-largest hotel group, called a press conference to warn that profit would take a tumble and that this would affect its construction programme. Up to 20 projects have been frozen and 35% of the rest of its planned work may be postponed.
Similarly, Park Place Entertainment has frozen its flagship construction project, a £320m tower extension to its mega-hotel and casino Caesar's Palace in Las Vegas. Hilton International, which has a British construction programme of £80m this year, is holding crisis talks. "Every area of the business is being reviewed right now," the company says. Whether this will mean a cut in construction spend is not known yet. "We may pursue one area at the expense of others, but things are uncertain at the moment."
Elsewhere, burgeoning resorts are suddenly in trouble. Dubai, in particular, is seen as one destination on a knife-edge – not least because of the escalating military situation in the Middle East. A £2bn scheme for two man-made islands due for completion in 2010 is now in doubt. These islands would have provided room for more than 80 hotels and 2000 luxury villas, but according to Phil Davis of Travel Trade Gazette, the scheme now has a "serious question-mark" hanging over it.
However, some hotel firms are trying to be more upbeat. Although she admits that "it is still too early to call", Kaye Dimmock, senior vice-president of hotel operating group Six Continents, refuses to see the worst. "A fall-off could potentially be a good time to invest and refurbish hotels. It will be possible if there are no crowds in the way and firms may well bring that kind of plan forward."
In the industrial sector, orders for new freight handling facilities at UK airports are also in doubt. Deals worth tens of millions of pounds to occupy cargo sheds at UK airports are understood to be on the verge of falling apart. Clive Redding, director of transport consultancy at property agent Lambert Smith Hampton, says: "I wouldn't be surprised if deals collapse. A lot of cargo is carried at the bottom of passenger aircraft. If a number of aircraft are cancelled, the amount of cargo is obviously reduced."
The reduction in air traffic could have a further unexpected impact on construction. Neil Johnson, a global logistics manager for the Freight Transport Association says: "Increased security and the decreased number of flights could be a big problem for the building industry. One threat is that projects that have to wait for electronics from abroad could be delayed – this area has really relied on speedy air freight."