A combination of the impact of the pandemic and continued oil price volatility, inflation and regional fiscal reforms has made it an extremely challenging period for shareholders and executives in the Middle East to manage their businesses.

According to PwC’s Middle East Working Capital Study, the importance of capital efficiency is rising against a background of rapid global change. Greater competition, investor scrutiny and levels of debt are all contributing to an increase in capital trapped within organisations.

‘Working capital efficiency is a key metric of corporate competitiveness – and right now that metric is flashing red,’ warns the report.

While the top-line metric of days working capital (the number of days a business requires to convert working capital into sales revenue) has stayed the same, the return on capital employed continues to deteriorate and companies’ average debt leverage has increased.

Overall, the financial efficiency of regional businesses is declining just when efficient cash management and capital allocation is most needed.