Overall sentiment and confidence in the Gulf’s construction sector has seen a marked increase over the past two years, according to Pinsent Masons’ GCC Construction Survey, which was at the start of 2018. The law firm’s findings showed investor sentiment improved in the region by approximately 7% in the last two years, growing from 32% to 39%.

Once again, the UAE was rated the top country to deliver growth in 2018, with 38% of the surveyed respondents expecting the Gulf state to provide the greatest opportunities throughout the year – a modest 2% rise on 2016. The Gulf’s skyline is not short of cranes – in part thanks to the ambitious state-sponsored building projects under way in the region, such as those aimed at supporting the Saudi Vision 2030. However, Pinsent Masons’ findings revealed that 20% of its surveyed regional professionals expect their order books to decline by more than 10% through the year.

While highlighting a cautious optimism that pervades the market for the time-being, such figures show companies operating in the Gulf are still facing challenges. These hurdles may not be exclusive to the Gulf, or even the Middle East, but contending with them requires each regional construction leader to innovate and adapt in a way that best suits their business. Take the example of UK-headquartered contractor, Laing O’Rourke, which like its contemporaries in the Middle East, is pursuing growth against a backdrop of squeezed budgets and consistent drives from developers towards the bottom line price.

“We’re very selective as to which jobs we will work on and who we will work with,” Mark Andrews, managing director of Laing O’Rourke Middle East tells Construction Week. “It’s about trying to achieve a critical mass where we can hopefully turn a profit rather than looking at growth for growth’s sake.

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“I think undoubtedly for some contractors it was all about growth, particularly those that were looking at initial public offerings (IPO) or were listing because there was this sense that the share price was driven by the backlog. Those of us that have been in construction for a long time know that if you take on bad jobs, it does not matter how many you have got – you are not going to make any money. Instead, ‘you are going to lose your shirt’".

With this in mind, selectivity is key for Andrews, who wants to find clients that “look at the broader value proposition beyond just price”.

“The market is still very much price-driven and that does challenge contractors that are trying to offer a high-end prospect,” he explains, adding that some developers in the region “just look for the bottom line price and every line of the estimate”.

“While there are some contractors that are happy to play in that game, […] I question the sustainability of it,” he says.

 

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