A leading construction forecaster has predicted that the terror attacks on New York will lead to total output falling 2% next year.
Martin Hewes, of Hewes & Associates, said although the drop had been expected, it was higher than he had previously predicted because of the impact of 11 September.

He said: "The attacks can have only made a declining situation worse. What happens to the likes of British Airways will affect all levels of the economy."

The RICS' latest survey this week confirmed a decline in demand for commercial property. In the third quarter of this year, 25% more chartered surveyors reported a fall in business occupation than reported a rise – in the second quarter, only 16% more reported a fall.

Hewes warned that construction's apparent buoyancy was deceptive. He said: "Firms are almost always busier than they have been just prior to a downturn and 11 September will amplify that." He added, however, that public spending should break the fall.

The forecast is that output will fall 4% in the commercial sector and 8% in the industrial sector next year. Total new work will decline 4% to £29.3bn (in 1995 prices).

The office market is expected to be especially vulnerable to the economic and psychological consequences of the destruction of the World Trade Centre.

"The main drivers for the office market are rising business confidence, profitability and employment," said Hewes. "But none of these factors are with us any more."

Media, telecoms and financial services firms are expected to be hardest hit by a recession. These account for 40% of office demand.