Conditions in the Irish construction industry continued to deteriorate significantly in February and fell to a new low for the third month running, according to new figures from Ulster Bank.

The Ulster Bank Construction Purchasing Managers' Index (PMI), the seasonally adjusted index designed to measure the overall performance of the construction economy, posted 35 in February from 35.3.

The PMI has posted below the 50 mark for nine months signalling deteriorating conditions in the construction sector.

"Although the overall construction index posted a new low in February, the fall was marginal as compared with January," said Pat McArdle, chief economist at Ulster Bank. "In broad terms, the sector again contracted sharply but the rate of decline did not accelerate."

According to Mr McArdle, this reflected a better tone in a number of areas.

"The decline in housing, for example, was less than in any month since last September. Commercial activity, too, was slightly less negative but there a further marked deterioration in civil engineering. Confidence, too, picked up," he added.

The pace of contraction of civil engineering activity accelerated markedly in the period and was the sharpest for four-and-a-half years. The overall fall in February construction activity was largely attributed by firms to lower new order volumes.

Anecdotal evidence suggests that a general decline in demand, and increased competition for tenders, had led to the fall in new business, according to the survey.The shortage of new work and the completion of existing projects led many builders to reduce their staffing levels in February.

Meanwhile, defaults and liquidations among Irish building firms and their suppliers more than tripled in the last quarter of 2007, according to figures from IFG subsidiary Trade Credit Brokers (TCB) which sells protection against non-payment for goods and services.

Eighty construction firms, or 40pc of all liquidations, went to the wall in the fourth quarter, a significant increase over the previous two years when failures averaged just over 25pc per quarter.

Building firms and their suppliers are suffering against a backdrop of sharp falls in new house completions and a slow property market, leaving many without cash.

In the past six months, the number of construction firms taking credit insurance against bad debt has also increased.