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GlobalData: Construction contractor exits serve as warning signal

Published by , Deputy Editor
World Cement,

Several major international contractors, including the UK’s Laing O’Rourke, are scaling their operations in the Middle East, but the past few years have laid bare structural problems facing contractors in the Gulf Cooperation Council (GCC), such as cumbersome bidding processes, unequitably drafted contracts and payment delays, says GlobalData, a leading data and analytics company.

Neha Bhatia, Construction and Infrastructure Editor at GlobalData, commented: “It is concerning that megaprojects in the UAE – including those linked to Expo 2020 Dubai – are now nearing completion, and Dubai's formation of a real estate committee to manage demand-supply balance could mean fewer projects entering the market moving forward.”

“Pre-construction progress is being made on Saudi Arabia’s gigaprojects, but only a limited number of contracts to work onsite are currently available, and contractors remain uncertain about the volume of work likely to emerge in the kingdom this year.”

Australian contractor, Cimic, formerly known as Leighton, said that it is planning to sell its 45% stake in Dubai-based BIC Contracting (BICC) – formerly known as Habtoor Leighton. Cimic said in January that it was now planning to focus on its core markets of Australia, New Zealand and Asia Pacific. UK-headquartered Laing O’Rourke is also scaling back its investments in the Middle East.

Bhatia continued: “Contractors exiting the GCC not only risk missing out on the ambitious major projects that are hard to find elsewhere in the world, but also face heavy costs when leaving the region.”

“It is nevertheless a calculated risk for some contractors, and for companies working in the GCC’s largest construction markets, the on-the-ground realities are not what they were. That global contractors are willing to accept financial losses as the price of exiting the GCC suggests the need for change within the local client community is more pressing than ever.”

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