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Sat 14 May 2016 12:10 AM

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Delays, disputes hit MidEast construction sector amid low oil prices

PwC report says capital projects, infrastructure have been greatly impacted by slowdowns and deferrals of gov't spending

Delays, disputes hit MidEast construction sector amid low oil prices
GCC construction, GCC real estate, Middle East construction, Middle East real estate

Capital projects and infrastructure in the Middle East have been greatly impacted by slowdowns and deferrals of government spending as a result of "lower for longer" oil prices, according to a new report by PwC.

PwC Middle East's survey suggested that the slowdown is likely to continue for another 12 months, based on responses from over 130 owners and developers across the region.

It also indicated an increasing number of disputes owing to shrinking budgets and payment delays - 62 percent of respondents said they had been involved in a dispute recently or expect to be involved in one in the next year.

"The capital projects and infrastructure sector finds itself bearing the full impact of 'lower for longer' oil prices... This is a significant contrast from our last survey when the industry grappled with capacity constraints driven by high volumes of spending and projects, now, it's the opposite," said Chris Scudamore, PwC capital projects services leader Middle East Region.

PwC said lower for longer oil prices are creating a squeeze on government funding, fuelling new methods of financing and delivery, such as PPPs.

Respondents said that introducing new sources of finance could improve the efficiency of the delivery of projects, with 44 percent and 38 percent saying they think more projects would run on time and to budget respectively.

"After the frantic pace of spending in the past few years, a slowdown in activity will give organisations the opportunity to prioritise projects and address internal issues," added Scudamore.

"But given the increase in cancellations and delays, we also believe it creates an environment where we will see disagreements and disputes continue to rise."

The survey found that more than 60 percent of respondents think spending will fall this year, while 75 percent have already been impacted by funding constraints.

It also showed that attracting and retaining skilled resources is now one of the top three improvement priorities, up to 33 percent from 26 percent in 2014.

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