Saudi Arabia to miss estimates on 2017 construction contracts: Faithful+Gould

Saudi Arabia could miss estimates on construction contracts this year, with new awards slowing down in the second and third quarters, consultancy Faithful+Gould said in a recent report.

“The total quantum of awards in 2017 has drifted away from expectations, with Q1 offering $11 billion, but total year-to-date coming in at just under $18 billion,” the firm said in its Construction Intelligence Report, KSA Update.

Unless major schemes move quickly during the last three months of this year, it is unlikely that estimates for the year will be achieved, it added.

Faithful+Gould had forecast this year’s project awards to value around $27 billion.

“With Q3 incorporating the quiet summer period, the contraction of the construction industry continued as the status quo continues to be one of struggle, as the troubled Saudi Oger, the country’s second largest contractor, finally closed its doors,” the report said.

“Supply chains are also shedding employees as backlogs shrink, and the market needs to move into growth to ensure it retains capacity to deliver future works,” it added.

The consultancy held a positive outlook for 2018 on the basis of privatization and alternative financing models that are being rolled out across the Kingdom.

“There is appetite for a variety of schemes that consortia are pricing now,” Faithful+Gould said. “The reprioritization of schemes in the government pipeline has taken longer than expected although it seems this process (whilst continually ongoing) is starting to have an impact.”

In a similar update on the United Arab Emirates (UAE), the consultancy said award activity in the country has been steady but behind Faithful+Gould’s annual forecast.

The UAE has marked $26 billion of awards in the year-to-date, while Faithful+Gould’s full-year forecast stands at $45 billion.

“There are some large schemes out to tender in the market at present. If a significant amount of these are not converted this year, 2017 could see a contraction from 2016 (itself a significant fall from 2015) and see the backlog deplete even further than the $17 billio lost last year,” the consultancy said in Construction Intelligence Report, UAE Update.

The agency expects acceleration in UAE’s oil and gas sector starting mid-2018, as the earlier slowdown in investment could mean that upgrades are required by oil companies.