The respected Construction Trade Survey paints a far gloomier picture of falling output and dwindling orders among contractors and suppliers.

Its findings stoke up industry concern that the Government is basing policy decisions on Office of National Statistics figures that are out of kilter with reality.

The wide-ranging survey warns that prospects for construction during the rest of 2010 look increasingly unsure.

Contractors highlighted falls in output in the third quarter, supported by product manufacturers that said sales of both light and heavy side products were down over the same period.

Firms are now deeply fearful about future prospects following confirmation that public capital expenditure will fall 30%.

Noble Francis, economics director at the Construction Products Association said: “The Trade Survey for 2010 Q3 highlights that the environment for contractors and product manufacturers is still extremely challenging, especially given that the public sector accounts for more than one third of total construction output.

“Despite a number of high profile contracts being let within the commercial offices sub-sector in central London, 71% of contractors, on balance, reported that order books fell in the third quarter.

“Of great concern, in the light of the CSR, 67% of contractors, on balance, reported that order books fell in the third quarter in public non-housing, which covers education and health construction.”

Stephen Ratcliffe, director of the UK Contractors Group, which also supports the survey, said: “This paints a picture quite different from the official growth figures which suggest – wrongly in our opinion – that construction is the engine driver of economic recovery.

“While there are still good opportunities – notably infrastructure – the outlook remains uncertain.

He said that the new government has made a good start in setting out its public sector investment plans but warned the whole picture has not yet been filled in.

The energy white paper is not due out until Easter next year and the industry has real concerns that the decentralisation of decision making will slow up both the planning and procurement of new public sector investment projects.

Julia Evans, chief executive of the National Federation of Builders, added: “Despite official figures showing impressive industry growth, the industry’s own figures point to a fall in output, falling prices and fewer enquiries. This all points to a depressing Christmas for the industry.”