With about Dh3bn (US$816.7m) owed for jobs completed, companies are choosing Dubai contracts carefully.
UK builders pick jobs carefully
Some British contractors are shunning invitations to tender from some of the biggest Dubai developers because of continuing doubts over their ability to pay on time. A significant number of UK firms are still owed money by cash-strapped developers in the emirate, said Nelson Ogunshakin, the chief executive of the UK Association for Consultancy and Engineering. The association estimated earlier this year that as much as Dh3 billion (US$816.7 million) was due to contractors.
"A substantial part of that is outstanding," said Mr Ogunshakin. "There's a dialogue going on between various government departments and clients, with a view to easing the process and ensuring payments come through." He added that firms which had been paid were forced to take a discount of up to 30 per cent as developers braced for further losses. The debt led the association, which represents UK consultants, engineers and contractors, to call on the UK government to intervene.
Lord Davies, the UK minister of state for trade, told The National the emirate needed to ensure outstanding payments were settled. "It's been a sensitive issue, and it's important that Dubai companies pay their debts," he said. Foreign contractors operating in Dubai continue to report payment problems despite moves to ease liquidity through a $20bn bond programme. Half of that has already been raised, and Dubai has announced plans to borrow the second $10bn.
Balfour Beatty, the biggest UK builder, expects its local order book to contract by half this year to Dh2bn, said Grahame McCaig, the general manager of the firm's local unit. "It's as bad now, if not worse than it was, and we've certainly not seen any improvement in liquidity and in the ability of people to settle debt," he said. "Effectively, we can't fund jobs to the extent we're expected to fund jobs, and that's having an impact on who we bid for, the jobs we consider and tender for. The financial stability of the client involved and their ability to meet their financial obligations on jobs is a huge priority for us."
Mouchel Group, a road and infrastructure maintenance company in the UK, this month booked an impairment of Dh89.8m against unpaid bills in Dubai. Meanwhile, WSP Group, an engineering firm, said in July there were "still many issues to resolve following the liquidity crisis which severely affected activity in Dubai in late 2008". Some contractors report, however, that payments have started to trickle through.
Ian Tarry, the regional director of Mace, a construction consultancy in the UK, said the firm's payment issues were "sorting themselves out". "Generally speaking, we're getting paid," he said. A source at Halcrow, an engineering company in the UK, said payments that were held up "are starting to be released". Mr Ogunshakin warned UK building firms to be careful when entering into pacts with local developers.