Effect of the market downturn is spreading beyond housebuilders as industry activity goes into reverse

The credit crunch, combined with the rising cost of raw materials and energy, has led to the sharpest fall in construction activity in 18 years.

Market forecaster Experian’s index of national construction activity fell to 40 during May, its lowest level since June 1991. Meanwhile, the orders index slipped below 50 for the first time in more than a decade, indicating a big decline in orders.

The figures come as job losses continue to spread beyond housebuilders. Wolseley said it had cut 6,000 jobs since last August, as it announced a 35% fall in global pre-tax profit. The firm said it would cut costs further in the UK as a response to the deterioration in the housing market.

Fellow materials giant Tarmac is cutting more than 300 jobs in its building products division and mothballing plants across the UK. It also cited the ailing housing market as the principal reason.

Meanwhile, a report from commercial analyst Plimsoll warned that 1,835 architects could lose their jobs in the next year as firms consolidate.

Three-quarters of the country’s top 1,000 practices will have to reduce their head counts, it said.

Several firms, including Hamiltons, Aukett Fitzroy Robinson and HTA Architects, have said they will be forced to lay off staff.

The employment prospects index has been falling steadily throughout 2008 and in May it dropped to 38, a level, again, not seen since the early nineties.

Although the non-residential construction market continues to fare better than housebuilding, this data shows how the overall market has faltered. The civil engineering index improved slightly to 49, but remained below the 50-point threshold used to indicate growth.