Property News · April 6, 2017

Delayed GCC payments discourage consultancy firms


 Growth in the consultancy market in the GCC is slowing dramatically as multinational firms have been deterred by late payment issues.A study by Source Global Research (Source) found that the consultancy market grew by 6 per cent over the past two years, which is a decline from 15 per cent growth recorded when the previous survey was published in 2014.The study said that the market had grown in size to US$3 billion – up from $2.8bn in 2014. About $900 million of this was spent by public sector clients, but the slowdown in work for governments was even more pronounced, dropping to 5.6 per cent last year, compared with 19.4 per cent in 2014.It said that the recent slump in oil prices had affected public sector budgets.Edward Haigh, a director of Source Global Research, said: “Six per cent growth meant that 2016 was the year in which the GCC – the consulting world’s star performer for so many years – stopped standing out.”Complaints from consultancy firms about late payments is also on the rise the study said, with firms reporting that conditions in Saudi Arabia and Qatar have become “markedly worse” over the past 12 months.Demand for consultancy services in the UAE grew by 6.6 per cent during the two-year period, reaching $815m last year. However, there was a significant difference noted between Abu Dhabi and Dubai. The former market was characterised by cautious clients and slow decision-making, according to Source, whereas the latter was described as a regional bright spot. Saudi Arabia remained the region’s biggest market, spending $1.31bn on consultants last year, while Qatar spent $342m. Financial consulting was the discipline most in demand across the GCC, and the report argued that the introduction of VAT next year is likely to increase that.The report also argued that the cancellation or postponement of many projects was also creating challenges for companies that are trying to plan their own resources.”You can’t help wondering if there’s a year of extraordinary growth dangling somewhere out there in the future of the GCC consulting market,” Mr Haigh added. “Combine Saudi Arabia’s National Transformation Programme with a recovering oil price, pressure building in Qatar as 2022 nears, and the Dubai World Expo in 2020, and you start to create a perfect storm of demand for consulting services. Unfortunately for consultants, that year will not be 2017.”Chuck Harrington, the chief executive of Parsons – a US-based engineering consultancy, which earned about 20 per cent of its global revenue of US$3.2bn in 2015 (the most recent year for which figures are available) from the Middle East – said that late payments “continue to be a major problem for companies doing business here”.”The overall issue of delayed payments in the GCC region has gotten more severe in the past few years; we are seeing our receivables – that is, approved invoices – go significantly beyond the contractual terms and conditions that we’ve signed up for,” said Mr Harrington. “Depending on the project, late payments can reach two to three times of the contractually mandated terms.”Mr Harrington added that there were ” some hopeful signs in Saudi Arabia, such as the government bond issuance last year, which eased the liquidity crunch in the kingdom”. mfahy@thenational.aeFollow The National’s Business section on Twitter

Source : thenational.ae
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