The Chartered Institute of Purchasing and Supply (CIPS) has released its figures for August 2012 which show housing activity is at its lowest since the beginning of the year when poor weather was the main factor.
This news is according to figures from the Markit/CIPS purchasing managers' index (PMI).
The index posted at 49.0 compared to the previous month's 50.9. Commercial activity drops for the first time in two-and-a-half years, with business optimism also falling.
David Noble, CIPS CEO said, "This is dire news for the construction sector which saw its fastest drop in new orders for over three years. Undoubtedly the Government will come under more pressure to help the sector and implement Sir Adrian Montague's proposals to kick-start house building, when it responds later this year.
"Both the decline in commercial activity and the significant drop in new orders are particularly worrying. The commercial sector had previously been propping up the figures and the lack of new contracts suggests things will get worse before they get better.
"Inevitably confidence has also been hit hard, and it has not been recorded as low as it is now, since last October. For good reason too, as it's clear that tough times still lie ahead.