The latest estimate for construction industry growth this year is 1 per cent - the lowest estimate so far for the year and a drop of 7 percentage points on last year.

According to Euroconstruct, a 19-member European research institute, construction growth in the private housing sector is to drop significantly, while public housing activity and infrastructural construction will increase.

Ms Annette Hughes, an economist with DKM economic consultants and Irish member of Euroconstruct, said issues such as reduced tourism and agricultural incomes on the back of foot-and-mouth, the US downturn and the outlook for the economy generally are also affecting private construction.

Another factor is tender price inflation, which has been "quite high".

Private sector house-building is forecast to drop by 8.3 per cent this year. The estimate is based on the sharp decline in the number of start-ups being registered by builders for the first five months.

Last year, the private sector built 46,700 new houses. The 8.3 per cent estimate, including repair and maintenance activity, reflects a 10 per cent drop in private house completions. A drop of 10 per cent would mean 4,670 fewer houses being built.

The housing sector, including repairs, accounts for in excess of 50 per cent of construction activity.

While private sector housing activity is set to drop, the opposite is true for public housing. Last year, 2,204 local authority houses and 951 voluntary sector houses were built.

According to Davy Stockbrokers, the drop in private housing activity is "due primarily to a severe shortage of residential building land".

Last week, the Construction Industry Federation said its mid-year forecast for construction growth in 2001 had been revised downwards sharply.

"Public investment, reflecting in particular the commitments in the National Development Plan, will now be the main driver of construction growth in 2001, with 12 per cent volume growth forecast," the federation said.