In the latest clear sign that low oil prices are taking their indirect toll not only the US shale sector, leading to billions in capex cuts and hundreds of thousands of lost oil and gas jobs, on Friday Saudi newspaper al-Watan reported that the multinational construction conglomerate Saudi Binladin Gropu (which was founded in 1931 by Sheikh Mohammed bin Laden Sayyid, father of Osama bin Laden who was removed as a shareholder in the business in 1993 and disowned by the family) has laid off 50,000 staff as pressure on the industry rises amid government spending cuts to survive an era of cheap oil.
This means that Binladin, one of Saudi Arabia's biggest firms and among the Middle East's largest builders, whose total workforce is around 200,000 just fired a quarter of its total staff.
Reuters adds, citing al-Watan's unnamed sources, that the group has terminated the contracts of 50,000 workers - apparently all foreigners - and given them permanent exit visa to leave the kingdom. However, the workers have refused to leave the country without getting paid as some had not received wages for more than four months. Furthermore, they were protesting in front of the Binladin's offices in the country almost daily, the paper added.
What is most disturbing is that one of the biggest companies in Saudi Arabia if the not the Middle East, has had a series of pay disputes with workers this year as it appears unable to fund payroll. In March, scores of workers gathered outside one of the company's office in Saudi Arabia to demand unpaid wages.
Migrant workers, who work for Saudi Binladin Group, gather as they
ask for a final settlement over salary issue
While Binladin prospered during Saudi Arabia's high oil price-driven economic boom in the past decade, employing around 200,000 workers as it built many of the kingdom's flagship infrastructure projects including airports, roads and skyscrapers, like many other Saudi construction firms, it has been hit hard in the past year as low oil prices have prompted the government to slash spending in an effort to curb a budget deficit that totaled nearly $100 billion last year.
As Reuters adds, 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.
The Binladin Group made tragic headlines last September (ironically, the 11th) when a crane toppled into Mecca's Grand Mosque during a dust storm, killing 107 people. Following the incident, the Saudi royal court said Binladin had been suspended from taking new contracts. An initial government probe found Binladin had not properly secured the crane. Binladin did not issue a public statement in response to the suspension.
Worse, it is no longer just Binladin's income statement that is impacted but the stress is now spreading to its balance sheet: the company has been discussing how to manage its debts with banks and a few have agreed to refinance some debt through steps such as extending maturities, with some providing short-term financing for the company’s working capital including staff wages, Reuters said. It is unclear if the conglomerate will still be able to avoid a comprehensive restructuring should oil remains in the $40-barrel range.