Optimism tempered among GCC construction firms for 2015, survey finds

Falling oil prices, high competition, and cooling of Expo fever to blame for decreased enthusiasm

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The GCC’s construction sector is optimistic about what 2015 holds in store, but its enthusiasm has been tempered over the last year, a new survey has found.

According to a survey by UK-based law firm Pinsent Masons, 77% of respondents have stated they are positive about 2015, but their optimism is down 13% from last year.

Falling oil prices, cut-throat competition, and the cost of accessible capital are to be blamed for decreased enthusiasm, the firm said in a statement.

Another reason for the tempered optimism may be the cooling down of the Expo fever, Pinsent Masons said.

Less than 10% of survey respondents felt the Expo would create a significant upswing for construction firms between 2014 and 2016, compared to last year, when 26% of firms thought the Expo would lead to a major boost between 2016 and 2020.

“These results offer an insight into how the GCC construction market is shaping up for the year ahead. Optimism clearly remains high, but there is a marked cooling compared to last year when Expo fever was at its height,” said Sachin Kerur, Managing Partner, Gulf Region at Pinsent Masons.

The strongest performing markets for construction in the MENA region for next year are expected to be Saudi Arabia (40%), UAE (33%) and Qatar (14%), the survey found.

UAE is perceived as the easiest market to work in, with 96% of respondents saying so, while Oman is the second easiest. Perceptions regarding ease of doing business in Saudi Arabia have improved, with 23% of respondents calling it the easiest market to work with, up from 10% last year.

“Construction firms have long perceived the opportunity in Saudi Arabia as being the most promising in the region. But, in the past, the challenge of doing business there has meant opportunities haven’t always come to fruition. This situation now seems to be changing, with the ease of doing business starting to improve. This suggests we may see more opportunities converting within The Kingdom in the years ahead, which chimes with the more open sentiment emerging from the Saudi authorities” Kerur added.

Looking ahead, Pinsent Masons also expects PPP’s to become an increasing part of the financing mix, although Kerur admits they are yet to gain traction as a primary means of funding big projects regionally.

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