Europe’s leading construction companies have warned that rising government debt and the need to cut capital spending will lead to significantly lower levels of state-funded contracts.

The continent’s 100 largest building companies by revenue have issued a stark assessment of the industry’s prospects, with many predicting a halving of government investment, according to a report published today by Deloitte.

Government spending has offered a lifeline to building groups, as infrastructure projects such as schools, roads and hospitals provided revenue and a shortterm buffer against the worst effects of the downturn. Over the past 18 months the flow of private money into the construction industry has plummeted. In 2009 in the UK, the industry’s leading trade body expects private investment to fall to the lowest levels since its records began in 1948.

Now, however, the industry expects to lose a large chunk of public spending as governments try to reduce debt burdens.

Financial Times