Business as usual for a depressed construction market

18 January 2016

Region needs more that just a few pockets of activity

There is an eerily familiar tone to 2016.

Like 2015, the year has started with concerns about spending cuts due to falling oil prices. The concerns have been amplified by budget cuts announced by the GCC oil exporters for 2016, and by mid-January there were early signs that the more measured approach to spending is starting to bite.

The clearest example came when Etihad Rail retrenched the majority of its expatriate workforce as progress on stage two of the UAE’s national railway stalls. The move also means that the 2018 completion for the much herald GCC-rail network is now effectively impossible.

Saudi Binladin Group’s (SBG’s) woes have also continued into 2016. Saudi Arabia’s Ministry of Finance has instructed the company to stop work on expansion of the Prophet’s Mosque in Medina.

It is not clear why the order was given, but after being barred from tendering for new work following the Mecca crane accident in September 2015, the lost cash flow will further challenge the finances of the kingdom’s largest contractor.

It is not all doom and gloom, and pockets of activity remain. Perhaps surprisingly given the debt problems of the past, the most optimistic market is Dubai. Contractors have submitted technical bids for the new metro link connecting to the 2020 Expo site, and contractors have been selected for a series of new building projects.

The region will need more projects than these to progress if it is to buck the downward trend.

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