Dubai's reliance on debt makes it vulnerable to the downturn
A week to forget. That was the headline in the Dubai press last Friday after 100bn dirhams (£18bn) were wiped off the value of shares on the UAE stock exchange in five days.
At the same time, developers announced hundreds of job cuts and credit became harder to come by than in the UK. Yes, the toxic debt tsunami has finally arrived at the shores of the Gulf, bringing uncertainty bordering on panic to those working there. As we report this week, Dubai is the main casualty in the Emirates, partly because it has been founded on borrowed money rather than oil. Hundreds of schemes are on hold and those that are still live are being built at a much slower pace.
But that’s not to say UK firms about to head east need cancel their tickets, either. Abu Dhabi, Qatar, Doha (and Saudi Arabia for those able to stomach the environment there) are booming markets sustained by vast oil reserves.
In Abu Dhabi, for example, the pace of commercial and cultural development is likely to slow because of the fall in the price of oil, but the need for roads, sewerage, desalination plants, power stations, schools and hospitals is not going to go away.
The way buildings are being designed and constructed is changing quickly, too – just take a look at our Gulf awards. The demand for technology that can deliver sustainable development is bound to ensure that the phones will long continue to ring for firms that can provide it. For sure, UK firms will need to accept tighter margins, take on more competition and perhaps negotiate trickier payment regimes – the Middle East is no longer a get-rich-quick Eldorado (which for most firms it never was) nor a perfect refuge from recession. But it is instructive: the slowdown there is a reminder that, wherever you are in the world, there’s no substitute for a sound business plan.