Celine Caulfield, commercial director at Trade Credit Brokers, a firm which provides credit insurance to businesses in the construction and engineering sectors, told the Sunday Tribune that there had been a noticeable tightening in the credit extended by banks to builders.

Caulfield cited the example of one wellknown builder who is currently developing two sites in north Leinster who has had his funding suspended by his bank.

"He is struggling to make sales and now owes over 700,000 to our customers, who have had to stop supplying him. He either has to find another funding source or dip into his personal finances, but in all likelihood it looks like he will go into insolvency, " she said, adding that the TCB was seeing an increasing number of similar situations arising.

Scott Rankin, a banking analyst at Davy Stockbrokers, said that banks are now paying a lot more attention to the construction sector. "I wouldn't say that they are going to start calling in loans all of a sudden, but I would be on the lookout for a few defaults. Some builders are certainly going to have cash flow issues, " he said.

Rankin said the main question was whether there would be a handful of insolvencies or if it was going to become a widespread problem. There was growing evidence that the market wasn't going to pick up and the stock of unsold houses would have to fall soon to relieve pressure on builders, he said.

Statistics released this week also revealed a dramatic increase of pessimism amongst builders. While the FAS/ESRI Employment and Vacancies Survey found that vacancies in the construction sector rose by 2% to reach 10% in July, employment expectations fell dramatically, dropping twelve points to reach -21% in July.

In other words, the percentage of employers expecting a drop in employment in the coming months is 21% higher than those predicting a rise.