The preceding May 2022 article highlighted the significant material price increases experienced by the construction sector in Qatar. This follow-up article examines the further wave of cost increases facing the construction industry globally, and in Qatar specifically.

As reported in the Financial Times, Albert Manifold, chief executive of market leading building materials supplier, CRH, recently warned of a “second wave of cost increases” resulting from rising energy costs and the Russian invasion of Ukraine.

A first wave of energy cost rises earlier in the year caused significant increases in the price of goods and materials. For example, our May 2022 article noted that, the price of copper had experienced a 70% increase, whereas the price of iron ore had doubled. Structural and reinforced steel costs also increased by 35.9% and 43.6% respectively. While the effects of these increases are ongoing, Manifold argues that a further, second wave of inflation has now begun, largely due to increases in secondary costs such as wages and logistics.

From a Middle East construction perspective, the results of Turner & Townsend’s 13th International Construction Market Survey suggest such fears are justified. National inflation rates (2.5% in the UAE and 4.7% in Qatar) remain low when compared with other countries and regions. However, 60% of respondents in the region cited skilled labour shortages (a key secondary cost and inflation indicator) as having a significant or high impact on the delivery of projects. Qatar is described as having “experienced a significant rebound in activity together with increased costs driven by volume of work and supply chain issues.”

Doha is highlighted by Turner & Townsend as having a ‘hot’ tendering market characterised by less competition for work between contractors, full order books and rising prices. Many projects in Qatar had completion dates preceding or coinciding with the start of the World Cup. There is therefore a risk that a ‘rush to complete’ may further exacerbate existing cost increases as compared with the wider region in the coming months.

If you would like further information or advice on points raised in this article or other construction law matters, please do not hesitate to contact Jonathan Parker or James McLellan.