Research by the TUC found that cuts to publicly-funded projects were the main reason for the slump, which has led output to be at its lowest level since 1998.
The coalition has reduced support for public construction works by over 27%, while spending on school, hospital and transport building projects has been slashed by over 37%, said the union organisation.
The fall in public sector building projects has not been made up by the private sector, which has also seen a decline in construction work since the coalition was formed, said the report.
Construction workers have suffered a £3,000 a year pay cut as a result of the downturn, said the TUC, which urged the Government to launch a programme of affordable house-building and investment in infrastructure projects.
TUC general secretary Frances O'Grady said: "The Government's failure to support our construction industry has been terrible for jobs, growth and wages. This research shows what happens to the economy when you cut back on vital state funding and why we need urgent investment in new affordable housing and infrastructure projects. Without this stimulus the construction sector will continue to struggle and slow down our recovery."
"The Government's gamble that the private sector would meet the demand created by the cuts in the public sector construction budget has also been shown to have failed. Since the Government took office, private sector construction work has declined by 4.5%."
Shadow housing minister Jack Dromey said: "George Osborne's £4 billion cut in investment in affordable housing saw a 68% collapse in new build affordable homes, now home completions are at their lowest level since the 1920s.
"With the construction industry shrinking by 10% our economy is flatlining with David Cameron and George Osborne giving us the slowest recovery for 100 years. We will not see sustainable economic recovery unless we put unemployed construction workers back to work, building the affordable homes the country needs."