Builders are absorbing rising construction costs by not passing on the expense to customers, the Royal Institution of Chartered Surveyors (Rics) has said.
It revealed tender prices fell 2.4 per cent in the first quarter of this year, despite costs increasing by 1.1 per cent.
Contractors fear a "credit crunch backlash" from clients unable to secure finance for new orders, industry magazine, Building has reported.
Rics said it expected workloads to fall this year, remain unchanged in 2009 and increase again in 2010.
"Input cost rises are currently quite strong, and are expected to remain so over the coming year," said Peter Rumble, information services manager of the Building Cost Information Service.
He noted contractors are "a little nervous about future workloads".
"The credit crunch and the slowdown in economic growth are expected to have a greater effect on construction output than first thought."