The index – which measures overall output in the sector – fell to 48.7 in December from 49.3 in November.

Any figure below 50 represents a contraction in the market.

The index has now posted below 50 in four of the past five months and the latest reading indicated the fastest rate of contraction since June 2012.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said: “Confidence in the construction sector is now lower than the four year post-recession average, reflecting the poor performance of the sector in the final month of 2012.

“December witnessed the fastest decline in output in six months and a huge drop in new business, signalling trouble for the year ahead.

“Construction in housing is particularly desperate having experienced the fastest decline in two years, with the current period of contraction now lasting seven months in a row.

“Commercial housing activity has also continued to fall, albeit at a slower rate, leaving civil engineering as the only sector recording growth in the industry.

“Continued increases in business costs, alongside low stocks at suppliers and longer delivery times complete a depressing picture for the construction sector going into 2013, making it hard to see where a change in fortunes might come from.”

Tim Moore, Senior Economist at Markit and author of the Markit/CIPS Construction, said: “December rounded off a miserable year for the UK construction sector, with output declining at the steepest pace for six months and new business intakes falling back at the fastest rate since April 2009.

“While some firms cited the unusually wet weather as leading to longer than expected seasonal breaks at the end of 2012, weak underlying demand remains prevalent throughout the sector.

“Survey respondents are also relatively subdued about the 2013 outlook amid reports from their clients that budgets will be under even greater pressure over the year ahead.

“A sharp and accelerated downturn in housing activity was the most striking feature among the overall weakness shown by December’s PMI survey.

“The pace of contraction in residential building was the strongest since the snow-related drop two years previously, and the extent of the decline made December 2012 one of the worst months for housing activity since the spring of 2009.”