The UK's construction industry has reached a new milestone, contracting at its fastest rate in over a decade.

The industry is worth 6% of the nations economy and recent figures show.

The Chartered Institute of Purchasing and Supply (CIPS) construction index fell by for the tenth consecutive month in December by two points to 29.3, its lowest level since the series began in 1997.

Speculation is now growing that the Bank of England will react by further cutting the interest rate to 1.5%, an historic low.

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After cuts of 2.5 percentage points in the past two months reduced official rates to a low of 2 per cent, the Bank's rate-setting Monetary Policy Committee (MPC) is poised to take more radical action on Thursday.

Today's CIPS survey also revealed sharp falls in new business and total activity prompting payroll cuts and the exacerbating the threat of further redundancies in the limping industry.

Roy Ayliffe director of Professional Practice at CIPS said: “Once again, the housing sector bore the brunt of the crisis as purchasing managers reported significant reductions in new business. Amidst a climate of doom and gloom, firms were forced to axe more jobs in preparation for what is set to be another year of trouble and turmoil.”

(DW/KMcA)