UK tube maker Polypipe is to close its Dubai factory as the Saudi-led trade embargo on Qatar shows no sign of easing.
The company’s overseas revenue was down 5.4% due to the embargo, imposed in June last year, and also due to "continuing Middle East project funding issues", Polypipe said in releasing its 2017 results on 20 March.
The factory was set up quickly in the middle of 2016 in the Jebel Ali Free Zone, and went on to fulfil orders worth £3.8m that year.
But with 60% of its output destined for Qatar, the embargo proved costly and Polypipe ceased operations last year, incurring a charge of £900,000, as reported in its 2017 interim results.
Now it has decided to take "decisive action" and dismantle the factory.
"Whilst the Middle East still represents a significant opportunity for the group, we have decided to pursue an alternative manufacturing strategy in the region through use of sub-contractors and to close permanently our Dubai manufacturing facility," said chief executive Martin Payne, ShareCast News reports.
"All equipment will be relocated back to our Horncastle plant where Polystorm is manufactured for the UK market, enabling us to remove the need for more expensive sub-contract manufacturing in the UK."
The action means Polypipe will take a £3.1m hit for machinery relocation, redundancies, and lease costs.
Saudi Arabia, the UAE, Egypt and Bahrain cut off transit to Qatar from their roads, ports and airports in June last year, forcing Qatar to set up alternative supply lines for a major development programme ahead of the 2022 World Cup.
Meanwhile, a strong UK performance helped Polypipe record a 3.9% rise in full year pre-tax profits to £55.6m.
Revenue rose 6.3% to £411.7m, while underlying operating profit was up 6% at £72.6m, the company said.
Image: Cut off: The skyline of Doha, Qatar in 2016 (Erick Irani/Wikimedia Commons)