This is the warning from the latest survey of small building companies from the Federation of Master Builders.

The FMB State of Trade Survey for third quarter of the year, the only one of its kind looking at construction SMEs, reveals that workloads have now been falling since 2008.

The survey also found most remained gloomy about future prospects with one in three expecting construction workloads to fall during the final three months of this year.

Richard Diment, Director-General of the FMB said: “When the Chancellor delivers his speech today to the Conservative Party conference he needs to be mindful that the building industry is in a dire state with little hope in the immediate future that things are going to get better.

“It is hard to think of another period in living memory when the building industry has been so badly hit by an economic crisis.

“The Chancellor needs to understand that a recovery in the construction sector is essential if it is to deliver economic growth in the wider economy.”

Diment said that 44% of FMB builders have reported falling levels of enquiries and the number expecting to increase employment has now fallen to just 16%.

The rising cost of materials was also a serious concern to builders with 88% expecting them to increase over the next six months.

Diment added: “The Government’s home energy efficiency improvement programme, the Green Deal, which will be launched next year offers a glimmer of hope but without a reduced rate of VAT to help boost consumer demand it is difficult to see any real upturn in building work.

“A targeted reduced rate of VAT in the Chancellor’s Autumn Statement would create tens of thousands of much needed jobs in the building industry as well as stimulating more job creation in the wider economy.”