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GCC construction contract values fall as a result of cheaper oil

The value of contract awards for GCC construction projects in 2015 is likely to be US$194 billion – down $2bn on last year’s total awards of $196bn, according to a new study.

The GCC Construction Industry – Trends and Challenges for 2015 report produced by research firm Ventures Onsite for The Big 5 trade show argued that the fall could be attributed largely to the decline in oil prices, which has lowered the cost of transport and building materials, thereby feeding into lower contract value awards.

Overall, it said the GCC’s construction market maintained “sturdy” activity levels.

Saudi Arabia remains the region’s biggest market, with the lion’s share at 44 per cent share, followed by the UAE (31 per cent), Qatar (11 per cent) and Kuwait (6 per cent).

For much of this year, Ventures Onsite had been expecting contract awards to increase by 4.5 per cent and hit $205bn by year-end, but it revised estimates downwards, blaming speculation about Qatar’s hosting of the 2022 Fifa World Cup for pushing back the timing of some deals.

Andy White, the vice president of The Big 5 show organiser DMG Events ME, said: “A lot has been said about how oil prices might affect construction markets. But each of the GCC nations has continued to invest heavily in infrastructure such as housing, and health care.

“Kuwait has more than trebled its contract awards this year, the Saudi government has made it clear that it will continue to invest, and the UAE has revealed more spectacular projects.”

“ The GCC Secretariat-General has also announced that the Gulf Rail network is meeting construction deadlines and is on track to meet its 2018 deadline.”

UK-based contractor Carillion revealed this week that revenue within its Middle East construction services division, which includes joint ventures in Al Futtaim Carillion in the UAE and Qatar, as well as Carillion Alawi in Oman, jumped 54 per cent in the first six months of the year to £326.5m, from the year-earlier figure of £212.6m. Underlying profit for the business was up by 43 per cent to £18.9m, from £13.2m a year ago.

Carillion said that the Middle East division’s sales were up on the back of a number of contracts won last year, and that profit climbed following a reorganisation of staff accommodation facilities, which “generated a greater benefit than expected”.

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