In a trading update to the city this morning the firm said: “The Board believes that results for 2010 will be below current market expectations.

“The Board also expects the trading environment and consequently the outlook for 2011 will be challenging and as a result the Group’s performance for 2011 could be below that of 2010.”

T Clarke said margins remain “under extreme pressure” and that dividends to shareholders will be reduced.

The announcement led to a 27% slump in the firm’s share price during early trading.

But the company believes an upturn is in sight led by the commercial market in London.

The statement said: “T.Clarke is well positioned for the eventual upturn, particularly in the London commercial sector which is seeing significant activity with several large office development schemes progressing.

“The Group is confident that it will win a number of these new projects, albeit we will see limited revenue benefit until 2012 on any schemes that we are successful in securing.”

Mark Lawrence, Group Chief Executive said: “Whilst the competitive market has adversely impacted the Group’s performance, we remain confident about the long-term potential.  There are a number of significant projects commencing over the next 12 months.

“T.Clarke is a profitable business and extremely well placed to benefit from this upswing in work and this underpins our strategy for organic growth and our unstinting commitment to deliver long-term value for all our shareholders.”