The value of contract awards in the GCC has fallen 28 per cent year to date when compared to last year, according to MEED’s latest research report, the GCC Projects Market Report 2015.

In 2014, there were $85bn-worth of contracts awarded in the GCC by the end of May, compared with $61bn-worth over the same period this year.

The fall in awards highlights the uncertainty surrounding the projects market, due to governments reviewing their spending plans on the back of falling oil revenues.

“With less new work being secured, diminishing backlogs may create a more significant slowdown in construction activity on site in 2016,” the report says.

Despite the drop in the first half of the year, MEED estimates that the GCC is on track for a record year of contract awards, due to the pipeline for the second half of the year.

However, whether this record is reached depends heavily on sentiment after the summer lull. If concerns around oil prices and security remain high, sentiment will be hit.

Saudi Arabia remains the largest projects market in the Middle East, and is expected to make $58bn of awards this year alone. Its growing, young population and need for greater power generation capacity is driving projects spending in the public infrastructure and power sectors, and it continues to invest in its oil industry.

Far from cutting its budget, this year the government has increased planned spending by 0.6 per cent to $229bn.

The UAE is the GCC’s second-largest projects market, but has experienced the highest decline by value this year. The value of contract awards has halved to $12bn compared with the same period in 2014. This is due in particular to the slowing property sector in Dubai and Abu Dhabi. 

“At the start of the year, when oil prices were below $50 a barrel, government departments in the UAE capital were instructed to reduce spending in 2015 by about 15 per cent. That instruction has led to investment plans being scrapped or rescheduled, with a clear impact on the value of new contracts being let,” says the report.