The firm confirmed the dividend reduction in a trading statement to the City today.

ISG said it was performing “broadly in line” with revised management expectations revealed in a profit warning in January.

Revenues in the UK have been maintained “but margins have been impacted by the current competitive environment.”

There has been a reduction in the size of projects in ISG’s core London office fit-out market while retail work has been hit by the High Street slowdown.

Turnover increased in the general construction business thanks to Olympics work while the south west division has returned to profitability following a restructuring.

ISG’s strategy of international expansion is proving a success and the dividend cut will allow the company to divert funds into overseas projects.

It said: “The impact of the reduction in the spending plans of UK supermarkets and banks in the second half is now expected to continue into 2012/13 and given the continuing uncertainty over the Euro, general tightening in credit markets and the significantly reduced pace of recovery in the UK economy, the Board has concluded that a more cautious approach should be taken.

“The Board believes that in the longer term the Group will benefit from conserving its internal resources to continue to support the growth of its overseas businesses.”

Shareholders will receive a total dividend of 9p this year compared to 15.1p last time.

ISG added: “In the UK in the short term we anticipate that trading conditions will continue to be difficult.

“We are looking to target areas where we see growth opportunities, particularly in the data centre, hospitality, high-end residential and international retail markets.”