The latest Markit/CIPS UK Construction PurchasingManagers’ Index fell from 54.8 in June to 51.9 in July.

The reduction in commercial activity was the fastest for 12 months and the main drag on the index as clients delayed spending decisions due to uncertainty over the political and economic outlook.

Weaker demand led to an overall reduction in new business volumes for the first time since the post-referendum rebound began in September 2016.

Tim Moore, Associate Director at IHS Markit and author of the IHS Markit/CIPS Construction PMI said: “Worries about the economic outlook and heightened political uncertainty were key factors contributing to subdued demand.

“Construction firms reported that clients were more reluctant to spend and had opted to take longer in committing to new projects.”

Mike Chappell, global corporates managing director for construction at Lloyds Bank Commercial Banking, said: “It has been a mixed month for the sector, so this dip in the reading is not a major surprise.

“The hope is that it is a blip rather than the beginning of a downward trend.

“Results from commercial contractors show margins are holding up reasonably well and improving. Meanwhile, any nervousness about pipelines has eased for many firms by the awarding of contracts for HS2.

“The principal headwinds – particularly input price inflation and concerns about the future supply of EU labour – remain, so the focus is on organic growth, continuing to boost margins to above the 2% mark and a disciplined approach to contract bidding.

“These priorities are still key if the industry is to mitigate the risks in the current trading environment.”