Almost five times more construction companies face 鈥渃ritical problems鈥� than this time last year, new figures show.

Statistics out this week revealed a 370% increase in the number of firms with severe financial difficulties in the second quarter of 2008 compared with 2007 and a 13% increase over the first quarter.

The report, from insolvency specialist Begbies Traynor, said construction was one of the worst-hit sectors, with 639 companies in critical difficulties compared with 136 last year 鈥� the second biggest rise of any industry after IT.

Fifteen per cent of companies in the 鈥渃ritical鈥� category are expected to go into insolvency procedures within a year, it said.

The news came as credit rating agency Experian released its two-year forecast for the construction industry. It said the impact of the credit crunch on the housing market had been 鈥渘othing short of catastrophic鈥� and that 2009 housing output may fall below 1991 levels, the trough of the last housing recession.

Problems in the private housing sector were likely to spill into public housing and bring down the industry鈥檚 overall output this year and next, it added.

However, it said strong growth in the public non-residential and infrastructure sectors would boost the industry over the next two years.

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