The construction industry has been hit hard due to reduced government investment and a lack of house building, according to the latest Glenigan Index.

Overall, the Index for March dropped by 31% compared to the same time last year.

James Abraham, Economist at Glenigan, said: "Glenigan recorded a 61% year-on-year fall in the underlying value of new private housing project starts during the three months to March compared with a year ago. This follows NHBC reports of more modest declines in the new home registrations in February compared to a year ago and indicates that, faced with renewed housing market weakness, developers are continuing to build out existing schemes but are opening up fewer new sites.

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"Whilst Glenigan expects house building activity to gradually improve over the course of the year, the latest data highlights that, with household incomes squeezed, market conditions remain fragile."

Elsewhere, the Glenigan non-residential index contracted by 19%.

Mr Abraham continued: "Government spending cuts have already ensured a modest decline in the value of health, education and community & amenity builds, further retrenchment is anticipated from the new financial year in April."

Also, the decline was outstripped by the drop in private non-residential building. The underlying value of office starts fell by 45%, while retail starts were 27% down.

Mr Abraham said: "This reflects private sector nervousness over low economic growth, high inflation and poor retail sales."

(CD/GK)