UAE construction after Covid-19

The UAE construction sector holds the opportunity to rework the way it operates in the post-Covid world

Few industries compare with the construction industry when it comes to solving challenging problems.

The industry is defined by its ability to deliver complex, bespoke structures, in unique locations, against impossibly tight time and cost deadlines.

That is perhaps why so many companies in the UAE’s construction industry have responded strongly to immense challenges created by the Covid-19 pandemic.

Cutbacks in spending by government clients and private sector developers alike have led to a 20 per cent slump in contract awards in the GCC in the first six months of 2020, while at the same time, cash flow considerations have seen an increase in payment delays and disputes over design variations.

The squeeze on revenues and cash flow has been exacerbated by delays to project delivery caused by disrupted supply chains and quarantined workers, which have led to many companies seeking legal advice about invoking force majeure clauses or dealing with clients over contract price renegotiations.

The crisis is forcing companies out of the region, and some out of business. The loss of skills could leave permanent scars on the region’s construction sector.

But the reality is that Covid-19 is not the cause of many of the challenges facing the construction industry in the middle of 2020. It has merely exposed the structural weaknesses in the industry that people have been turning a blind eye to for many years.

The industry’s problems can no longer be ignored. Covid-19 has forced many of the problems to put on the table and confronted.

As a gradual response, the construction industry is trying to solve the problem.

Companies are accelerating the adoption of new technologies, from BIM, to drones to virtual reality in order to remove waste from their processes and improve safety. Contractors are exploring new forms of contract. And the banks and governments are seeking to work with their clients to ensure that there is enough liquidity to the industry moving and to mitigate the default risk.

The biggest long-term threat to the industry remains that lack of new project opportunities, and it is to be hoped that governments continue with their infrastructure plans. From an industry perspective, it is imperative that construction companies keeping pushing ahead with their problem solving drive.

UAE Construction After Covid-19 is the 11th report from the MEED Mashreq Construction Partnership. It looks at how the pandemic can be a catalyst for change for UAE construction, building a more resilient industry moving ahead.

Download the report here

10 August, 2020 | .By Richard Thompson