Shares in Morgan Sindall fell by more than a fifth yesterday as the construction company said that it would switch production to social housing units because of a marked downturn in the housing market.

Morgan Sindall's shares slumped by 162p to 585p, wiping £69.2 million off its value. In August last year, before there was any hint of a downward move, Morgan Sindall's shares were worth £17.64.

The company said that it was facing challenging conditions and that next year's results would be harmed as a result.

While social housing work remains healthy, home sales on the open market, which last year accounted for 6 per cent of group revenue, have fallen by half. To counter the problem, Morgan Sindall said that it had cut production costs and would build more social housing units.

Shares in other housebuilders were also hit after gloomy data released by Nationwide, the building society.

Persimmon shares fell by 7.75 per cent to 291p and Redrow by 7.37per cent to 132p over concerns about margins and level of debt. Barratt Developments, which is expected to update the market on its refinancing next week, closed down more than 2 per cent at 56p and Taylor Wimpey shares fell by more than 3 per cent to close at 60p.

The bad news in the housing sector reflected the Royal Institution of Chartered Surveyors' (RICS) finding that construction workloads have fallen at their fastest pace since 1995.

The biggest falls have been in housebuilding. Sites have been closed and new developments deferred because of the economic downturn and restrictions on mortgage availability.

Economists at the RICS gave warning yesterday of job losses in the construction sector, if the slump in workload and market sentiment were to endure.

“If this pattern continues, then the industry will have to start making significant cutbacks,” David Stubbs, senior economist at RICS, said.

The surveyors' body also said that the sector downturn would make it difficult to meet government housing targets.

Separately, Caroline Flint, the Housing Minister, announced a package of measures aimed at propping up the affordable homes market.

She hinted that money earmarked for affordable housing could be used to purchase properties “to keep the market moving”.

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