THE construction sector’s future is likely to remain grim as Brexit anxiety postpones projects and slashes spending.

The industry is suffering worse-than-expected output as investment in housing and commercial property stalls, the Office for National Statistics (ONS) has said.

The warning comes just days after a Markit/CIPS purchasing managers’ index survey revealed the sector had slumped into “unknown territory”, with the EU referendum triggering a seven-year low in work.

Investors have also rushed to cash out on commercial property in the days after Brexit, with firms including Aviva and Standard Life halting property fund trading.

According to the ONS, construction output contracted 2.1 per cent in May compared to April, and 1.9 per cent year-on-year.

It added the numbers were below economists’ forecasts.

However, Chris Williamson, Markit chief economist, warned worse is to come.

He said: “A drop in UK construction output in May adds to what is looking like an ugly run of data for the sector.

“However, it looks like there’s worse to come, possibly much worse.

“The reality of the UK leaving the EU and the associated heightened uncertainty, especially in relation to commercial property and housing investment, is likely to cause further stress.”

The ONS figures come after a Markit/CIPS survey said housebuilding had led the sector into recession levels.

David Noble, chief executive at the Chartered Institute of Procurement and Supply, added: “Gloom and fragility has descended, with the continuing ambiguity and indecision flinging the sector into unknown territory.”