Risk in global construction at its highest level
Based on the Q2 2016 update of Timetric’s Construction Risk Index (CRI), risk has increased globally, with the unweighted global average score rising to 41.68 from 41.12 in Q1 2016. This is the highest level of risk in the 11 quarters since the CRI was established. Risk has picked up across both emerging markets and advanced economies, with the former’s risk score reaching 49.37 in the Q2 2016 update, and in the latter rising to 33.42.
Sweden remains top-ranked, supported by strong economic growth, but its fast rising property market continues to prompt concerns of overheating, and the country’s risk score has risen by 1.5 points. Indeed, the top four countries in the CRI, namely Sweden, Switzerland, the US and Singapore, all recorded an upturn in risk in the latest update.
The UK and Qatar both suffered marked increases in their risk scores in the latest update, resulting in both countries being downgraded to a rating of B1. The worsening risk profile for Qatar reflects the deterioration in the country’s fiscal position owing to low prices for crude oil, and the subsequent negative impact this will have on infrastructure investment. The UK dropped six places in the rankings to 15th, an outturn that follows the result of the UK’s referendum on EU membership in June. The result in favor of the UK leaving the EU has created a high degree of political and economic uncertainty, not only in the UK but also among major markets in the EU. There is growing concern over the progress of a number of large-scale infrastructure projects in the UK given the change in leadership in the government.
In total, 34 countries suffered a deterioration in their risk profiles in the Q2 update. Although crude oil prices have recovered from dropping to below US$30 a barrel in January 2016, prices are still at low levels, and this continues to have a negative impact on the economies and construction industries in major oil-exporting countries, particularly those in the Middle East.
Timetric’s Construction Risk Index (CRI) is designed to provide a standardized view of the underlying degree of country-level risk facing the construction sectors in 50 major developed and emerging markets around the world.
The CRI, which is updated on a quarterly basis, provides an analysis of current conditions and a forward-looking assessment of general and specific risks that could prevent projects from being executed, result in major disruptions to projects, or ultimately lead to project failures. The CRI is based on five dimensions of risk, each with varying weights: market risk, operating risk, economic risk, financial risk, political risk.
Source: Company Press Release