The announcement by Balfour Beatty that it will sell its shares in Dubai-based Dutco Balfour Beatty (DBB) signals the end of an era for contracting in Dubai.
The UK contractor says the move to sell its shares in DBB to its local partner Dutco is part of its broader strategy of retreating from international markets it is also leaving Australia and Indonesia.
Balfour Beatty is not completely retreating from the world stage and it says it will now focus on chosen markets in the UK, US and the Far East. The fact that the Middle East is not one of those chosen markets is testament to the difficulties that international contractors now face when operating in Dubai and the rest of the region.
In the past, companies such as Balfour Beatty were relied upon by local partners to vital expertise for complex projects. Today, local companies have gained that experience themselves and no longer need the technical support that an international partner once brought; without that need international contractors struggle to compete in a market that places greater emphasis on costs at the expense of safety, quality and timely delivery.
This issue has become even more acute over the past decade. Although Dubai still has grand ambitions, since 2008, the projects that actually move ahead have become more standardised than they were in the past. And then more recently, over the past two years, tightening liquidity has forced clients to become even more driven by low prices than they had in the past, and for existing work, even more laggard on payments.
Today, the main edge that international contractors have is funding. This is a fundamental shift in the contracting equation because unlike the past when contractors could take out money for work done in the region, today they have to play a longer game and bring in money first.
Some firms are keen to do this. UK companies such as Carillion and Kier have managed to secure work with UK government funding support, and other European and Chinese contractors have done the same.
These new market realities for international contractors do not suit everyone. South Africas Murray & Roberts said last year that it plans to leave; Balfour Beatty now says it will leave. The question now is who will be next?
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