Abu Dhabi pledges to act over late payments to contractors

The Abu Dhabi Government is taking 'appropriate steps' to expedite late payments to contractors, engineers and architects. Delores Johnson / The National

The Abu Dhabi Government says it is taking "appropriate steps" to expedite late payments to contractors, engineers and architects working on more than 1,300 projects around the emirate.

"The Abu Dhabi Government is fully aware of its obligations in terms of outstanding payments to contractors and has taken the appropriate steps to ensure that all these obligations are met by the responsible government entities," the Office of Government Communications (OGC) told Reuters.

Projects range in scale from several hundred thousand to billions of dirhams, the OGC said.

"The Abu Dhabi Government recognises the valuable contribution that the contractors and their suppliers make to the local economy and appreciates how important the timely management of cash flows is to the health of these businesses."

Engineering, construction and architecture firms have been at the sharp end of Abu Dhabi's property crunch last year, which coincided with a review of major expenditures by the emirate's Government concluded in January.

The number of firms reporting difficulties in securing payments from government bodies during the past year have mounted, with some companies incurring heavy losses.

Mouchel Group, an infrastructure group based in the United Kingdom and listed on the London Stock Exchange, said in November it was owed Dh72.5 million (US$19.7m) by the Department of Municipal Affairs, some of which had been written off to account for the lack of certainty over its payment.

In a trading statement this month, the company said it was implementing a "balance sheet restructuring" after its profits were hammered by losses at its Middle East business, which has taken a hit of £2m (Dh11.4m) in one-off charges this year.

The collapse in the company's operations has left its shareholders wiped out. Mouchel shares have fallen 99.3 per cent since 2007. Austin-Smith:Lord, an architecture firm based in Scotland, was forced into insolvency late last year because of late payments of £11.3m by the Abu Dhabi Authority for Culture and Heritage over the Qasr Al Hosn cultural centre.

During the past few months, companies including WYG Group, a British technical consultancy, and Aukett Fitzroy Robin, an architecture and fit-out company based in the UK, reported an increase in contracts after the Abu Dhabi Government's spending review restarted projects in the emirate.

In a trading statement this month, Aukett Fitzroy Robin said a slowdown in the UAE had led to its Middle East operation being reduced to a "base cost position" last year but reappointment to a hotel contract for the Marriott Courtyard in Abu Dhabi had helped to move the firm from loss to profits once funding was resumed in the second quarter of this year.

Between delayed payments in Abu Dhabi and difficult trading conditions in Dubai following its property downturn of the past few years, several construction firms have abandoned the UAE for other countries in the Arabian Gulf.

WSP Group, a UK engineering and management consultancy, said the performance of its loss-making operations in the Middle East had been "held back by a project in Abu Dhabi" in its annual report in February.

"Our Middle East business has won significant infrastructure management and master planning projects in which Qatar is increasingly becoming the region's centre of activity as the activity in Dubai remains relatively quiet and, in Abu Dhabi, has slowed," WSP said.

Other firms say they are considering Saudi Arabia and Qatar as a result of a slowdown in the UAE construction market.

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