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By Christina Fincher and David Milliken
LONDON, Nov 4 (Reuters) - Britain's construction sector shrank last month at its fastest pace since records began more than a decade ago after falling house prices and tight credit took their toll, a survey showed on Tuesday.
The Chartered Institute of Purchasing and Supply/Markit construction index fell to 35.1 from 38.8 in September. That was the eighth consecutive month the index has been below 50, the level which marks contraction, and the lowest since the series began in 1997.
"There was no let-up in October for struggling constructors as the global economic and financial malaise continued to unnerve the sector," said Roy Ayliffe, director at CIPS.
The Bank of England is expected to cut rates by at least half a percentage point from their current level of 4.5 percent on Thursday, potentially boosting the construction sector which has struggled since the credit crunch pushed up financing costs.
Employment and new orders both fell at the sharpest pace since the series began, suggesting contractors are braced for a lengthy downturn.
Of the three sub-sectors, housing construction recorded the sharpest contraction, falling to 25.2 from 26.1. Commercial construction also performed poorly, with activity falling at a series-record pace. Civil engineering fared the best, although it too saw a contraction in output.
Philip Shaw, an economist at Investec, noted that without government spending, the figures would have been even worse.
"I think it emphasises the broadness of the economic downturn in the UK," he said. "Construction is not just the housing market but also includes investment in buildings and works."
A global shortage of capital has forced many banks to clamp down on lending over the past year, squeezing the lifeblood out of the property market.
House prices have already fallen around 14 percent from their peak and construction firms are feeling the pinch.
British housebuilder Persimmon said last week that falling house prices had resulted in it writing down the value of its land holdings by a further 600 million pounds.
British housebuilder Bellway Plc is cutting prices by 25 percent at some developments after an "unprecedented" decline in the housing and mortgage markets led to a 29 percent drop in pretax profit for the year ending July.
By contrast, contruction and engineering firm Balfour Beatty said earlier on Tuesday that its exposure to infrastructure projects meant that trading had been strong since June. (Editing by Stephen Nisbet)