DUBAI (Reuters) - Construction company Saudi Binladin Group plans to cut about 15,000 staff, people with knowledge of the matter told Reuters, in a sign of the pressure on the industry as the Saudi government trims spending in response to low oil prices.
The possible layoffs at Binladin, one of Saudi Arabia’s biggest firms and among the Middle East’s largest builders, would represent a small fraction of the group’s total workforce, which is around 200,000, according to its LinkedIn page.
But the planned cut-backs are an example of the choices which companies are having to make as Saudi Arabia’s economic boom loses steam.
Binladin did not reply to repeated calls and emails seeking comment to its offices in Riyadh, Jeddah and Dubai.
“The Saudi construction sector is definitely soft. There’s general uncertainty and it’s very difficult to plan where to focus on” because companies are not sure which projects will go ahead, said one source who works in the industry, declining to be named because of the sensitivity of the matter.
Some of the 15,000 workers will be laid off immediately, while others will be transferred temporarily to work on a multi-billion dollar airport project in Jeddah, another source said.
Labor market reforms, designed to push more Saudi citizens into private sector jobs, have since 2011 made it more difficult and expensive for construction firms to hire foreign workers, pressuring the industry.
In September, the Saudi royal court said Binladin had for now been suspended from taking new contracts after a crane toppled into Mecca’s Grand Mosque during a dust storm, killing 107 people. An initial government probe found Binladin had not properly secured the crane. Binladin did not issue a public statement in response to the suspension.
The biggest long-term challenge for the business of Binladin and other Saudi construction firms, however, may be government spending curbs in an era of cheap oil.
The world’s top oil exporter is running an annual state budget deficit estimated by the International Monetary Fund at over $100 billion, and the finance minister said in September the government was delaying some projects to save money.
He did not elaborate, but industry sources said that among other things, a plan to build soccer stadiums across the country had been cut back, a $201 million contract to buy high-speed trains was canceled, and expansion of an oilfield was slowed.
Government bodies have also demanded cost cuts from some contractors. More information on austerity measures is likely to come next month, when the government is expected to announce its budget plan for next year.
Additional reporting by Katie Paul in Dubai and Reem Shamseddine in Khobar; Writing by Andrew Torchia; Editing by Mark Potter
Our Standards: The Thomson Reuters Trust Principles.