Pressure on the Bank of England to deliver another drastic cut in interest rates this week was ratcheted up yesterday as a key survey showed the construction sector shrinking at its fastest rate in at least 12 years.

Activity across the construction industry plunged last month, led by a collapse in housebuilding activity, according to the latest CIPS/Markit purchasing managers’ survey of the sector.

Its headline index on construction conditions tumbled to the lowest level since the survey began in 1997, sinking from 31.8 in November to only 29.3 for last month on a scale where any figure under 50 indicates contraction.

A further CIPS survey of the crucial services industries, which account for two thirds of the economy, is released today and is expected to show that conditions there are deteriorating at a headlong pace.

The vulnerability of the economy as it embarks on a bleak new year is also emphasised today as the latest gauge of consumers’ sentiment shows that it sank still further last month.

The regular snapshot of consumer confidence from Nationwide Building Society suggests that it plumbed new depths during December, dropping to virtually half the levels seen a year before. Nationwide’s headline index of sentiment fell to 47.0, down from 51.0 in November, and 84 in December 2007. Three quarters of people polled said they believed that the present economic situation was bad, with 49 per cent expecting it to worsen over the next six months. A record 63 per cent of those questioned said that they believed that fewer jobs would be available in six months.

All but two of sixty-one City economists polled by Reuters between December 29 and yesterday expected the Bank to respond this week with a further cut in interest rates. Of 61, 41 are betting on a further half-point cut in rates, to 1.5 per cent, with four expecting a three-quarter-point cut and 14 predicting that rates will fall by a full percentage point to 1 per cent.

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