Britain's biggest tool rental group gave warning on Wednesday that the slowdown in the construction industry next year would be worse than previously forecast.

Speedy Hire warned its 5,000 employees that a further round of job cuts would be inevitable as conditions deteriorate.

The company, which based in Haydock, Merseyside, has already let 429 staff go and expects a further 63 to leave by the end of the year. It has closed 33 depots this year and plans to cut 260 vans and lorries from its vehicle fleet.

However, Steve Corcoran, the chief executive, said that a second round of cost-cutting was likely in the new year. He told The Times: “We haven't done anything wrong as a business — but the private sector has effectively exited the market. There have been 800 construction projects cancelled or deferred in the last five weeks and we have to take a view on that. We can't have a cost base geared for work that isn't there.

“We are taking a fairly aggressive view on the market. We feel it will be worse than some are reporting.”

Mr Corcoran said that Speedy Hire was assuming there would be £63 billion of construction work completed during the next year, compared with an annual average of £80 billion since 2000, as housebuilding and other private-sector projects, including retail developments, are shelved.

He added: “If you annualise current run rates, you have a market that runs substantially downwards. That points to 5,000 new construction projects next year, rather than 9,000. We see more downside than upside.”

Mr Corcoran said that activity in London had tailed off before other parts of the UK — but predicted that infrastructure work associated with the Olympics, including projects to showcase the capital, would keep activity ticking over. He said that business was also holding up in Scotland and Wales but gave warning that the North East of England and the West Country were most problematic.

He said: “When you go down into Devon, Cornwall, Somerset, Dorset, it is heavily geared to the residential and leisure sectors, and those areas are not doing well.”

He was speaking as Speedy Hire reported a 3.9 per cent rise in half-year pre-tax profits to £23.8 million as sales rose by 22 per cent to £256.2 million. Sales from the company's top 50 construction clients were up 36 per cent in the period.

Mr Corcoran added: “It isn't all doom and gloom and it is important that we don't just concentrate on private-sector work. Work from infrastructure projects, regulated industries and Government is still pretty good.

“Things could also change if nuclear and renewable energy projects are accelerated, but these are big projects that require a lot of planning, political will and money, so we are erring on the side of caution there as well.”

However, shares fell 3¼p to 180½ p. Nick Spoliar, of Altium Securities, the broker, said: “The unavailability of credit for small and medium-sized companies, which make up around 40 per cent of Speedy's client base, has generated the significant revenue declines, which the group is seeing from this sector of the market.”

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