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Last week was a bad one for the industry. Although the All-Share Index remained roughly at the same at 2616, shares in the construction and materials sector underperformed, falling 1.2% to 3593.

The moderate performance of Hanson and Wolseley, the two FTSE 100 powerhouses within the sector, was not enough to drive the sector as a whole as shares in both companies rose less than 1% to 543.5p and 1193 respectively.

Few companies were spared. Shares in 31 of the 49 companies listed in the sector fell, contractors and housebuilders alike. Market uncertainty was rife last week as the news was dominated by the investigations into the London bombings and a warning from the government and Scotland Yard that more attacks in the UK were likely.

But it would be wrong to blame falling shares purely on the terror threat. The bombings may have contributed to share price falls, but they accentuated existing trends in the economy. Other fears reflected in the market last week were about diminishing consumer confidence, disappointing retail spending, falling house prices and, within the industry, concern about falling construction output.

A brighter prospect is an interest rate fall, much speculated on but yet to happen. The consensus in the market is that the Bank of England will drop rates to 4.5% in August, and then to 4.25% in November. Some analysts say that interest rates will be cut even sooner to offset the economic impact of the bombings.

Some of the companies worst hit last week included Wilson Bowden, down 5% to 1105, and Bovis Homes, down 5.4% to 660p, as fears about the housing market continued unabated.

In the support services sector, Mouchel Parkman was up 5.6% to 266p after it was appointed preferred bidder on a £188m regeneration contract in Rochdale. Amec, Atkins, WSP, Waterman and White Young Green, also listed under support services, saw shares rise, albeit modestly.

Contractor Morgan Sindall was also a highlight, up 2.9% to 787.5p and T Clarke rose 2% to 282p. This reflected market expectation that it would win work on the London 2012 Olympics.