Alshaya Group, the Middle East franchise owner of Debenhams, said its outlets across the region would continue operating as normal despite the collapse of the department store chain in the UK.
The Kuwaiti family-owned business, which has 26 Debenhams stores across the Middle East, including nine in Saudi Arabia and six in the UAE, said business would be unaffected by Debenhams failing to find a buyer to save its business.
However, 12,000 British employees at 124 UK stores face losing their jobs, just a day after retail tycoon Philip Green's Arcadia fashion group entered administration, threatening about 13,000 jobs.
"Whilst the UK high street faces ongoing challenges, Alshaya Group confirms that today's UK news announcements about Arcadia Group and Debenhams do not affect its Middle East business operations and our stores will continue to welcome customers as normal," Alshaya told The National on Tuesday.
Debenhams, a feature of the UK high Street for more than 200 years, said it would start a wind-down of the brand while continuing to seek offers for all or parts of the business.
Alshaya Group also owns the franchise for several Arcadia fashion brands, including Topshop, Burton, Dorothy Perkins and Miss Selfridge.
Debenhams Group, which fell into administration for the second time in April, said its sale process to potential buyer JD Sports did not result "in a deliverable proposal".
“The administrators have therefore regretfully concluded that they should commence a wind-down of Debenhams UK, whilst continuing to seek offers for all or parts of the business,” the company said in a statement.
Debenhams staff in the UK were told the news on Tuesday morning, with the brand continuing to trade across the country and online to clear stock.
David Macadam, chief executive of the Middle East Council of Shopping Centres, said the impact to franchise holders of brands, such as Debenhams, going under occurs much later and “to a far less extent in the Mena region”.
"It takes time to filter through the system to reach this end of the world and in the meantime, it's pretty much business as usual, as long as the inventory is there," he said.
Sandeep Ganediwalla, partner at the Middle East practice of India's Redseer Consulting, said this is not the first time a UK chain has gone through administration without its UAE operations being compromised. He points to the collapse of Jamie Oliver's restaurant group last year, which did not affect the running of Jamie's Pizzeria in Dubai's Jumeirah Lakes Towers.
"There are a lot of brands in the UK or other parts of the world that have gone into administration but because this is a franchise operation, the franchise operators have decided to continue with the brand," said Mr Ganediwalla.
"It depends on whether customers think the brand is tarnished and whether sourcing continues. If the underlying designers go out of business and there is no stock for Debenhams to stock here, then that is a challenge. If that is not the case, I would not be surprised if Debenhams continues to operate in some form.”
He noted the US brand Borders, which went into administration in 2011, yet its UAE franchise owner Al Maya Group continues to operate 17 stores across the Emirates, with other outlets in Oman and Qatar.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
What sanctions would be reimposed?
Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
- An arms embargo
- A ban on uranium enrichment and reprocessing
- A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
- A targeted global asset freeze and travel ban on Iranian individuals and entities
- Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
TOP 5 DRIVERS 2019
1 Lewis Hamilton, Mercedes, 10 wins 387 points
2 Valtteri Bottas, Mercedes, 4 wins, 314 points
3 Max Verstappen, Red Bull, 3 wins, 260 points
4 Charles Leclerc, Ferrari, 2 wins, 249 points
5 Sebastian Vettel, Ferrari, 1 win, 230 points
Abu Dhabi GP weekend schedule
Friday
First practice, 1pm
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Saturday
Final practice, 2pm
Qualifying, 5pm
Sunday
Etihad Airways Abu Dhabi Grand Prix (55 laps), 5.10pm
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UAE currency: the story behind the money in your pockets
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