Reversing declines will take time

08 December 2015

Firms hungry for new work in 2016 may have to wait

It has been a bad year for the GCC’s projects market, but not that bad.

With less than a month till the end of 2015 there has been $156bn of contract awards this year, down from $182bn of contracts awarded in 2014.

While the drop in the value of awards has been significant, it is important to remember that the 2015 total is likely to be close to the $160bn awarded in 2013, which at the time was a record year.

The question is will the resilience continue into 2016? For most companies the answer is no. UK-headquartered law firm Pinsent Masons’ annual GCC Construction Survey found that just 32 per cent of respondents are optimistic about the year ahead, down from 77 per cent that were optimistic about 2015 last year.

The negative sentiment reflects the expectation that oil prices will remain low and governments will cut back on capital spending next year as they seek to balance their budgets.

The negative outlook also demonstrates skepticism over the market’s ability to tap alternative sources of funding and the use of public-private partnerships (PPP). During the second half of this year the call to use PPP to deliver projects has grown louder and louder, and while lawyers and consultants are busy advising governments, construction companies do not expect their labours to produce instant results, with 67 per cent of respondents to the Pinsent Masons survey saying they were not currently involved in, or anticipating becoming involved in, PPP projects over the next 12 months.

Until either PPP projects start to be awarded in earnest or oil prices start to dramatically improve the prospects for 2016 will remain bleak.

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