Optimism growing in GCC construction sector, says report

Pinsent Masons' GCC Construction Survey found that despite optimism, many businesses have experienced worsening contract conditions and longer payment periods
Optimism towards the GCC’s construction sector saw an increase from Pinsent Masons 2016 survey
By Bernd Debusmann Jr
Sun 28 Jan 2018 02:16 PM

Sentiment in the GCC’s construction sector has risen 7 percent from 32 to 39 percent over the course of the last two years, according to new data from Pinsent Masons’ GCC Construction Survey.

The findings show that the UAE remains the one market expected to deliver the most growth in 2018, with 38 percent of respondents saying they expect the country to provide the most opportunity over the next year, compared to 35 percent in 2016.

“Optimism towards the GCC’s construction sector saw an increase from our 2016 survey, despite ongoing challenges with lower oil pricing and headwinds facing the private non-oil sector,” said Sachin Kerur, Head of Middle East Region at Pinsent Masons.

Despite the overall increase in sentiment, the data found that 20 percent of those surveyed in the GCC expect order books to decline by more than 10 percent in the coming months, compared to 16 percent two years ago.

A large proportion of companies – 86 percent – said contract conditions were less favourable than the previous year, with the same percent of respondents saying that payment periods were longer. Approximately 67 percent of respondents also noted that they had been involved in more excuses than had been expected before the year started, compared to 59 percent in 2015.

“Whilst analysts predict a slight economic revival across many GCC markets during 2018, the survey results are indicative of what has been a challenging time for the construction sector - which has grappled with the impact of lower oil prices and ongoing geopolitical tensions,” added Sachin.

Of the various sector types within the larger construction industry, 60 percent of respondents said they believe that power – including renewables – will offer the most opportunities in 2018.

Notably, public private partnerships, or PPPs, were found to be increasingly seen as a means of attracting investment, with 40 percent of respondents said they were currently involved in, or expect to be involved in, PPP projects in the next year, compared to 32 percent in 2016.

“PPPs provide an opportunity for the private sector investors and developers to access the various sub-sectors of the region’s infrastructure market,” Sachin noted. “We anticipate a rise in PPPs now that regional governments and the private sector have developed longer-term strategies designed to adapt to a new reality of lower oil prices.”

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