Some of the UK’s biggest construction companies have warned that increasingly ferocious competition for a shrinking pool of work risks driving the industry back into the 'dark days' of the 1990s.

The slump in demand for construction work, exacerbated by customers’ desire to cut costs, has provoked the return of aggressive bidding for contracts as companies are forced to take on work at low profit margins or even losses.

'With the recession biting we are seeing the lower margin bidding right across the board, not just the small companies,' said Ashley Martin, finance director of Rok construction group.

'Undoubtedly we are having to sharpen our pencils as customers are looking for better value in an increasingly tough environment,' he added.

Financial Times