Small suppliers are real victims of downturn

Payments to small suppliers are being delayed because some companies are too far down the list of contractor's and developer's priorities, a top supplier has said.
Small suppliers are real victims of downturn
By Jamie Stewart
Sat 13 Dec 2008 04:00 AM

Payments to small suppliers are being delayed because some companies are too far down the list of contractor's and developer's priorities, a top supplier has said.

The global financial downturn and subsequent plummet in demand for real estate has led to a block in the flow of liquidity, with small scale suppliers being victimised.

"Extending terms of payment or delaying payment has been going on and increasing for the last couple of months," Ulma Formwork general manager Andreas Gathmann told Construction Week.

"Contractors themselves say there is a cash crunch because developers have not paid them. They have a lot of outstanding liabilities which they have to cover and then establish priorities."

Gathmann added that speed of payment therefore depended upon where the formwork companies came in the list of priorities.

"They have cement and steel suppliers, then lawyers, and then formwork companies as well," he said. "It depends how high up you are in the priority ranking. You will either get paid earlier or later."

The credit squeeze has seen many sections of the industry forced to review business and staffing levels amid insecurity over the viability of future projects.

Rasmala Investments founder and CEO Ali Al Shihabi used a keynote address to the Dubai Property Society last month to warn that developers would soon find it "virtually impossible" to secure funding for mega projects.

Gathmann said that there had been no cancellations as yet, although much feared project delays had set in.

"There have not been firm cancellations but projects that we are providing assistance to have been put on hold," he said. "But then this was expected given the financial crisis."

"This past year we doubled revenue sales which was very good," Gathmann continued. "But this past month we have seen - not necessarily a drop but a relative stagnation in terms of projects."

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