The latest research from the trade body, which follows a survey of its members on the impact of the UK crashing out of the EU with a deal, found that over half (53%) of respondents say it would result in higher material prices.

Just under a third (29%) fear the move would lead to lower workloads and enquiries, while more than a quarter (26%) said it would result in less access to skilled workers.

When asked how best the new PM could prevent an economic downturn later this year, the top five interventions cited by construction SMEs were the following:

1. Reduce VAT on repair, maintenance and improvement (87%);
2. Make more money available through Government funding schemes aimed at SME house builders, such as the Home Building Fund (36%);
3. Reform the Apprenticeship Levy so more SMEs can train apprentices (36%);
4. Invest funds in local authority planning departments to speed up the planning process (30%);
5. Embark upon a national programme of social house building (25%).

Brian Berry, chief executive of the FMB, said: “As the Conservative leadership contest rumbles on, construction SMEs are worried about the potential impact of a ‘no deal’ Brexit, which would have immediate and potentially disastrous consequences for the construction industry. Material prices are the biggest cause for concern – widely-used building materials such as timber are largely imported and any disruption to that would lead to soaring prices and delays to construction projects.

“More broadly, a significant proportion of construction SMEs think that a ‘no deal’ Brexit would result in lower workloads and enquiries as confidence in the economy might wobble as people abandon plans for new projects until the UK is on a steadier footing.”

He added: “However, the next PM has it in his gift to guard against any potential economic downturn by stimulating activity in construction and house building as soon as he gets the keys to No.10. Construction SMEs believe that the best way to do this would be to slash VAT on housing, renovation and repair work from 20% to 5%, which would help tempt homeowners to finally commission the home improvement projects they’ve been putting off due to Brexit-related uncertainty. This would give a much-needed boost to the construction sector and the wider economy.

“The next PM should also make more money available to SME house builders through government funding schemes and stimulate apprenticeship training through fundamental reforms to the Apprenticeship Levy. Once elected, the new PM has a responsibility to steady the economy. There’s no better way to do that than investing in construction and house building, which would boost economy.”

Meanwhile, two separate reports have warned that Scotland’s economy is “running on fumes” and growth is likely to slow because of Brexit uncertainty.

A quarterly survey from the Scottish Chambers of Commerce showed that companies were failing to invest and were facing rising costs in areas such as wages and raw materials.

Chambers chairman Tim Allan said: “Since the initial cliff-edge Brexit of March 29 the pressure on firms has eased slightly but the underlying trends point to an economy running on fumes.

“The majority of firms for all sectors in the survey are putting off investment and say this trend will continue over the summer months.

“All are desperate for some kind of resolution to Brexit before the October 31 deadline. Businesses are weighing the costs of the chaos caused by more dithering over Brexit and the burden is severe.”

And accountancy firm KPMG has suggested that there was going to be a widespread slowdown across most sectors this year, with output from construction and manufacturing set to be lower than anticipated.

Catherine Burnet, the KPMG senior partner in Scotland, said: “It’s clear that the combination of deepening political uncertainty at home and an apprehensive global outlook are taking their toll on the Scottish business community.

“Continued underinvestment should be anticipated if greater clarity isn’t provided on the future direction of the UK’s global trading relationships.

“Scotland’s business leaders have demonstrated a remarkable resilience in recent years, but they’re beginning to lose faith in what lies ahead.”