Construction will remain in recession for for the next two years as rising energy prices and materials costs take their toll on the economy, a new survey reveals.

Published by the Construction Confederation and the Construction Products Association and reported by Building magazine, the survey found that contractors output had fallen during the second quarter of 2008 compared with the same time a year ago, a net balance of 17% reported a drop.

Output fell in all sectors compared to the first quarter. Falls in private housing were reported by 48% of contractors, with 26% reporting a fall in output in new public sector housing.

Predictions for Q3 are even worse, with 39% of firms expecting a fall, and most think this will continue to drop for the next 12 months.

The news came as Building revealed results of another report showing prospects for empoyment in construction are at their lowest since 1992. Experian's monthly economic tracker index fell to 35, a drop of four points since last month, showing that fewer firms are expecting to take on staff than at any point in the last 16 years.

Eager to improve its cash flow in the face of an economic downturn, Wates is looking to the Middle East, reports Construction News. The privately-owned contractor is drawing up plans to target work in the thriving cities of Dubai and Abu Dhabi as work in the UK fit-out and retail sectors struggle.