Kier, one of Britain's biggest construction and house building companies, today gave warning of a slowdown in public sector spending across the country.

Chief executive John Dodds, said the housebuilding plunge is now starting to spread into the multi-billion-pound public sector construction market for new schools, hospitals and roads.

Mr Dodds said: "We think the economic slowdown is everywhere. Construction ultimately can not avoid in my opinion some sort of slowdown. I do not however see that yet in the south. The key is the public sector and if it begins to slow and if it does happen it will not be via a public announcement. The government will withdraw money and will not be available as it was."

When asked by Times Online whether it was possible that up to half a million jobs could go across the entire housebuilding and construction sector - in a repeat of the early 1990s job losses, Mr Dodds said: "Yes. We are looking at that [scenario]."

He added: "I am not sure of the overall number. There will be significant redundancies in the housebuilding sector without a shadow of a doubt and that is not going to help the overall economy."

Kier said it was sitting on record order books, but is seeing evidence of a slowdown.

He said: "On support services, local authorities are tight on money - it is not affecting us - but a large part of that [tightening] is for building maintenance. It is by and large everywhere. My reading of that is that budgets this year will be tighter."

Kier is one of the firms that is benefitting from the government's £45 billion Building for Schools state secondary school refurbishment programme.

Today the company reported it was "making good progress in advancing" a Kent Building for Schools for the Future project to financial close that will provide £100 million of initial construction work and the potential for £150 million more.

Kier is one of six construction firms contracted to build the Government's new Academy schools personally championed by the former prime minister Tony Blair. "That will continue," Mr Dodds said.

Economists and industry leaders have been privately worrying for weeks that, faced with a reduction in stamp duty tax receipts from the housing slump and a fall in corporation tax receipts, the government would eventually have to cut its rate of spend upgrading Britain's ageing infrastructure.

Kier's public sector waring came as the building group said that while the construction business from private property developers in the south of England "had never been busier," in the north of England orders were starting to weaken.

In Kier's houesbuilding business, reservations for the company's new homes over the past two months were down 35 per cent compared to last year.

Kier reported its housbuilding margins are under pressure as a result of a lower volume of sales and a reduction in selling prices, prompting the company to state: "It is very difficult to make predictions on the level of sales for 2009 due to the current uncertainties in the market, but our projections are for far fewer sales than this year."

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