Output in Britain’s construction sector lost momentum in January, with business activity slowing to its weakest for 10 months, as Brexit uncertainty weighed on firms.

The IHS Markit/CIPS UK Construction purchasing managers’ index (PMI) fell to 50.6 in January from 52.8 the previous month.

This missed economists’ expectations of 52.5. A reading above 50 indicates growth.

Commercial work was the weakest area of construction output with data indicating a decline in commercial construction projects for the first time since March 2018.

IHS Markit said anxiety related to Britain’s impending departure from the European Union at the end of March and concerns about the outlook for the UK economy had hit customer demand.

Growth in new business was also weak in January and eased to an eight-month low due to low demand for construction services and a lag in converting sales, which IHS Markit said reflected a “wait-and-see approach to spending by clients”.

Construction firms were also cautious about hiring new staff as the survey pointed to the slowest rise in employment numbers since July 2016.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said the construction sector “suffered a sharp drop in output growth in January, and the softest rise in purchasing volumes since September 2017, as Brexit continues to hamper progress and dampen client confidence”.

“The biggest shock came in the form of job creation which has managed to suffer the slings and arrows of Brexit highs and lows with solid hiring since the referendum result. Employment rose at the slowest rate since July 2016 and with optimism also in short supply, the sector only needs a small nudge to tip it closer to recession.”

Tim Moore, of IHS Markit, which compiles the survey, added: “Delays to client decision making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019. Difficulties converting opportunities to sales were reflected in a slowdown in total new business growth to its lowest since last May.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that the outlook for the construction sector, unlike other sectors, is “quite binary, based on the Brexit path chosen by politicians”.

In the event of a no-deal Brexit, Mr Tombs said the construction sector may “slide into another recession, amid weaker business confidence and tighter credit conditions. But provided a deal is signed off, the construction sector likely will enjoy strong growth soon”.

He added that “business investment should rebound later this year, given that firms’ profit margins are relatively healthy and their balance sheets are awash with cash”.