“In our forecast … construction investments will decline by five percent this year. According to this we can expect around 20,000 people will lose their job in the construction industry in the coming year,” BI’s chief economist Fredrik Isaksson told AFP.

He said the sector employed 300,000 people last year, so the expected decline would represent 6.6 percent.

“The Swedish construction sector is experiencing its most rapid decline since the beginning of the 1990s,” the federation said in a statement.

“The construction of new homes will be halved compared to recent years,” it said.

“The outlook for 2009 remains very gloomy after the autumn’s slowdown. There is a considerable risk that households will be even more cautious (financially) in the future given the rise in unemployment,” Isaksson said in the statement.

BI said consumer pessimism had led to a decline in demand for new homes since last year.