There is a new contest among company bosses: claiming that their markets are the worst since the most distant downturn they can remember.

Lord Harris, the carpet magnate, is wearing the yellow jersey at the moment, having said that trading is the most difficult he has seen since the 1950s. But the housebuilders are catching up, with most now saying that conditions are the worst for 30 years.

In the past few weeks it has become clear that the pace of the downturn in the housing market is dramatically steeper than in the early 1990s.

According to the Halifax, house prices have fallen about 8 per cent over the past ten months, while it took 45 months for them to fall 13 per cent from their peak in June 1989.

The speed of the fall is driven largely by the severe contraction in mortgage finance after the credit crunch. New mortgage lending in May was down 44 per cent on the previous year, the Council of Mortgage Lenders said yesterday, although it was slightly up on April.

This contraction is much sharper than experienced in the 1990s and it is feeding through into a sickening slump for housebuilders.

Persimmon, the country's second-biggest homebuilder, said yesterday that first-half completions were down 31 per cent. Persimmon is better placed than many of its rivals. Unlike Barratt, it resisted the temptation to do a big deal during the boom and has much more headroom on debt.

It has also got away without big writedowns on its landbank so far, thanks to canny buying.

But the prospects are pretty grim for Persimmon, as witnessed by its decision to lay off 1,100 salaried staff, or about a fifth of its workforce. Some of its rivals will be lucky to survive at all.

According to analysts at Royal Bank of Scotland, a 20 per cent fall in house prices would knock 70 per cent off land values and several of the leading companies are likely to breach banking covenants.

“So what if the companies go bust?” you might ask. The land and the building workers will still be there, just employed by somebody else. Well, yes and no.

The failure of some of Britain's biggest housebuilders would not have the same impact as the failure of banks, but it would have knock-on effects and serious disruption to the industry would hamper its recovery when demand picks up.

Jobs are being slashed and the seed corn is being thrown away as apprenticeships are cut back. This sort of dislocation can only exacerbate longer-term housing shortages.

The Council of Mortgage Lenders yesterday bemoaned the fact that the special liquidity scheme set up for lenders by the Bank of England had not increased the flow of funds to the housing market or lowered their cost. Not that it was designed to, of course.

The industry's best hope in the short term is that Sir James Crosby, who has been looking at funding shortages in the mortgage market on behalf of the Chancellor, pulls a rabbit out of the hat.

But it is hard to see what remedy he could come up with that would make a real difference without putting taxpayers' money at risk.

Even if there was the political will, there seems little that can be done to avert a severe and perhaps prolonged slump in housing.

But, despite increasingly gloomy news from elsewhere, that does not mean that the economy as a whole is heading for the worst downturn since the Black Death.

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