The funding drought has caused a sharp fall in confidence among Scottish contractors.
Firms are less optimistic than at any time in the past year.
And 88% of those quizzed during the Scottish Building Federation’s quarterly membership survey confirmed they had seen a decline in private sector work during the last year.
A lack of demand from private sector clients and not enough bank lending were highlighted as the two main reasons for the fall.
Contractors also complained about cut-throat bidding in the private sector as the fight for work intensified.
The survey showed that confidence slipped by eight points in the second quarter of the year compared with the previous quarter.
Federation chief executive Michael Levack said: “Since the beginning of the year, when the economy has supposedly started to recover, we are actually seeing a significant weakening of confidence among construction employers about the short-term outlook for their business.”
Levack said public sector work had sustained the industry but, with cuts expected in tomorrow’s emergency Budget, construction firms would now need the banks to start lending again in order to fund private sector work.