The CBI has warned that public spending cuts are driving down bids for construction projects to such low levels that builders will be unable to meet the Government’s low-carbon economy targets.

The business leaders’ organisation has begun a campaign to protect investment levels, after accusing construction company clients, about 40 per cent of which are in the public sector, of using the recession as an excuse to drive down prices to unsustainably low levels.

John McDonough, chief executive of Carillion and chairman of the CBI’s construction council, said: “To ensure that the construction industry can play its role in the UK’s economic recovery, we need to make sure that good procurement practices do not fall by the wayside.

“We have already seen worrying signs of some clients using the recession as an excuse to seek the lowest possible tender prices.” He said that if prices were driven down too low, construction companies would not have the resources to spend on more expensive energy-efficient building methods.

Tender prices are expected to fall by 6.6 per cent by the end of this year and are not forecast to recover until 2012, according to a Construction News survey. Construction output decreased by 1.1 per cent in the third quarter of this year, after a 0.8 per cent drop in the previous quarter.

Lord Mandelson set up the Innovation and Growth Team (IGT) last month to review construction. It will consider the sector’s contribution to the development of a low-carbon econ- omy. The Government is expected to announce the appointment of a chief construction adviser as soon as this week, according to reports.

Mr McDonough said: “The Government needs to lead the way and work with the construction industry to ensure focus remains on innovation, partnership and value for money.” He called on the Government to change its view of the importance of the construction sector to realising its aim of creating a low-carbon economy and put an end to the practice of driving down prices.

He said: “Construction is seen as an old industry and not very glamorous, which is a shame. The contribution of construction companies to a low- carbon economy is a good example of why construction will play a vital role in the future of the country.”

Pricing of construction projects is already a contentious issue. Last month the Office of Fair Trading (OFT) imposed fines of £129.5 million on 103 construction firms in England that had colluded with competitors to drive up the price of public sector contracts. However, the OFT said that there was evidence that bid-rigging was still taking place.

The CBI argues that without government support for building projects, the economic recovery will take longer.

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