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UK construction eyes Dubai bailout money

December 21st, 2009

Construction contractors in the UK who are owed an estimated £250 million by Dubai developers are still holding their breath after the Abu Dhabi bailout announcement, according to a leading industry body.

In anticipation that about $5.9 billion of the total $10 billion rescue will go towards the payment of the Gulf state’s construction and other trade debts, the Association for Consultancy and Engineering (ACE), which represents some of the UK’s largest contractors, said that the success of the handout would depend on the cash being deployed quickly.

Nelson Ogunshakin, chief executive of ACE, told The Times: “While the amount of money that should go towards construction debts is encouraging, the question is how quickly it is used and what will be the priorities for where the money will go. It is early days yet.

“We encourage payment as soon as possible. We need to keep the pressure on to ensure projects continue to go ahead. Some companies are now getting close to the point where they will be in difficulties with their own short-term financial position unless they receive payment very soon.”

UK-based construction companies including Balfour Beatty, Carillion and WS Atkins, the engineering consultancy, all have operations in Dubai, albeit scaled back over recent months.

The problem of late payments first emerged in Spring this year, according to ACE, with some contractors chasing the same debts for more than six months. The total amount outstanding owed to the Association’s members has fallen from £400 million to £250 million over the period, with around 30 per cent of all contractors still pursuing payments.

The majority of construction firms remain reluctant to discuss the problem of delayed repayments despite yesterday’s bailout, fearing that they will jeopardise future relationships with clients. However, a spokesman for Atkins said that it is “confident that the Middle East market will recover” and pledged to maintain its presence in the region as the liquidity issues are resolved.

ACE said that Dubai’s debt problems should act as a warning sign for contractors who plan to work for sovereign-backed developers in future.

Mr Ogunshakin said: “There are lessons to be learned from this situation for anyone entering into contractual relationships with quasi-sovereign backed private sector clients on how those contracts are dealt with when there are issues of default. We hope that in the future other organisations, in whatever country, bear those lessons in mind.”

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  1. steve james
    December 24th, 2009 at 10:45 | #1

    So if Balfour are not paid that will destroy their cash pile in one foul swoop and the shares were only worth holding for the ‘fighting fund’ they held

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