By Hugh Tomlinson www.business.timesonline.co.uk
British engineering groups and consultants are owed up to $2 billion (£1.25 billion) by government-related companies in Dubai, following the collapse of the Gulf state’s property market and subsequent debt crisis.
Previous estimates put the money owed to UK companies at $250 million (£157 million).
The Business Secretary Lord Mandelson is scheduled to visit the emirate in mid-February to urge the Dubai government for swift repayment of unpaid bills due to British contractors.
Dubai’s real estate market went into freefall early last year, with up to 50 per cent wiped off property values in the last 12 months. As construction projects across the city were put on hold or cancelled entirely, some businesses have been offered as little as 50p in the pound on the value of their contracts by government clients.
Nakheel and Limitless, two developers behind some of Dubai’s more extravagant projects, are known to be among the main offenders for renegotiating contracts. Both are part of Dubai World, the state-owned conglomerate which triggered panic on international markets in November when it revealed it was unable to repay $26 billion of debts. The group is currently locked in talks with its banks to agree a standstill on its debt repayments pending a restructuring of the business.
Dubai received $10 billion from the Abu Dhabi Government and its banks late last year to repay a $4 billion bond issue by Nakheel. The remaining funds are to be used to settle outstanding debts to contractors and provide working capital for ongoing projects.
Some funds have begun to trickle down to flagship projects, but smaller companies with little leverage and few long-term interests in Dubai have been squeezed particularly hard. Fearful of aggravating their clients, they have turned to the UK Government for assistance.
Others have slashed staff numbers in the region to wait out the downturn. WS Atkins, which has worked on the $7.6 billion Dubai Metro project and a number of developments with Nakheel, has cut 30 per cent of its Gulf workforce. The company has declined to reveal how much it is owed.
“It is a real concern. We have raised the matter consistently at the highest levels with the UAE authorities,” said Jeff Wilson, director of UK Trade and Investment in Dubai.
Mr Mandelson’s visit will be the latest in a series of government initiatives to press the case of UK contractors in Dubai. The issue was put to Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, when he visited London in November. Trade minister Lord Davies also raised the matter during a visit to the region in January.
Dubai World declined to comment.
