Firms making up the UK Contractors Group said that recent output figures for construction had painted a misleading picture of an industry in good health.

In a letter to the Chancellor ahead of the Budget, UKCG chairman James Wates, states: “This is because the industry is living off its stock.

“The outlook for 2012/13 looks much bleaker because of substantial cutbacks in public sector capital spending and the fragility of the private sector.”

He warned: “The result is likely to be significant contraction and job losses in the industry.”

Wates added that poor visibility of work left in capital spending programmes had seriously eroded confidence about jobs and training.

Also contractors are concerned that several important planned Government initiatives have slipped since being announced.

In the pre-Budget letter, he warns the Chancellor: “There appears to be some deliberate attempts to delay decisions and to obfuscate on forward plans.

“A prime example of this is the future of the school building programme.  The Sebastian James review was originally scheduled to report to ministers before Christmas.

“In March, we are still waiting for the Department for Education to signal its intentions.”

He added: “In health, reform of the system means there is virtually no information on future investment intentions, even in respect of repair and maintenance.

“There is also a concern that an unintended consequence of the localism agenda will be delays in the planning and procurement processes.”

The UKCG has called on Government to issue a clear statement committing councils to awarding work on best value to stop the slide back to cheapest price procurement.

Major contractors also fear the Government has mistakenly sided against PFI believing contractors have made excessive profits.

“One way of saving money is to eliminate the excessively costly procurement processes where the private sector lost considerable sums bidding projects which had not been properly thought through by clients before they went to market.

Wates said: “This has been done elsewhere where we have exported PFI to countries such as Italy and Spain at considerably reduced costs.”