News that Dubai government is plugging funds into developer will come as relief to UK companies working in the region

Nakheel has started to receive funds from the Dubai government and is renegotiating contracts and payment plans with its creditors.

Chris O’Donnell, the developer’s chief executive, said: “We are trying to help them and ourselves through our current situation. We are at the stage of commercial settlements and negotiations. Rather than detail on percentages, it is a true statement to say that construction costs are falling and there is definitely a reduction."

The news will come as a partial relief to UK contractors and consultants working in Dubai, many of which are owed millions of dirhams, but the renegotiations will be less welcome. One boss of a project management firm with an office in Dubai said, “I have heard that Nakheel is asking for as much as 50% off agreed fees. It’s not great but try getting paid in the UK by some clients. At least people here in Dubai are getting some sort of payment.”

Last week the UAE’s largest contractor Arabtec admitted it was owed over £500m by clients in Dubai.

In an interview with local news website Emirates Business, Nakheel’s O’Donnell also confirmed work on Palm Jebel Ali had “slowed down” while the Palm Deira and the Universe projects were on hold.

In March the Dubai government secured a $20bn bailout deal from the federal UAE government in the form of a bond programme, the first half of which was issued in March, with the second $10bn expected later this year. The bailout is primarily aimed at helping Dubai’s developers repay their debts.