Government figures show construction stabilising after two quarters of steep decline.

But industry experts are warning that the improvement will not last as spending squeezes hit contractors.

Michael Ankers, Chief Executive of the Construction Products Association said: “These estimates are very much in line with our own industry surveys and the information our members are telling us confidentially.

“Growth in private sector construction has finally begun to recover and although public sector construction output remains stronger than we had anticipated it is clear that the impact of the public sector spending cuts is still to be felt and is forecast to cause sharp falls later this year.

“These public sector cuts will begin to hit the construction industry in the second half of the year.  With the continuing economic uncertainty and falling consumer and business confidence, we are forecasting that construction output this year will be slightly lower than in 2010.

“However, looking further ahead to 2012, we expect the recovery in the private sector still to be insufficient to offset further sharp falls in public sector spending and output next year is expected to be 2.5% lower than in 2011.

“Construction work is also very much focused in the South East and particularly Greater London where there are major projects such as the Olympics, Crossrail and a number of major commercial developments.

“Activity in other parts of the country is falling more quickly and we are looking to government initiatives such as the Green Deal to help stimulate the industry, retain construction employment across the country and help the wider economic recovery.”

CECA director of external affairs Alasdair Reisner said: “We had hoped that the construction sector might show stronger growth, having shaken off any impact from poor weather that dogged previous quarters.

“The slim growth seen in the ONS figures indicates that any real recovery remains a distant hope rather that a reality.

“It is particularly worrying that these figures may not yet fully take account of expected reductions in public sector spending on construction, creating the risk that there may be further bad news for construction growth in the second half of the year.”