Middle East companies could unlock up to $54.7 billion if working capital efficiency improves, according to a PwC Middle East study.

 

Companies across the Middle East released significant liquidity in 2024, with net working capital (NWC) days improving by six days – a 5.6% gain – according to PwC’s 2025 Middle East’s Working Capital Study.

 

The report highlights that while corporates are benefitting from sustained revenue growth, rising costs and increased short-term debt are placing renewed pressure on profitability and financial resilience.

 

Middle East corporates achieved a 6.3% year-on-year (YoY) increase in revenue in 2024, driven primarily by non-oil sectors. The UAE’s non-oil revenue grew by 16.8% and Saudi Arabia’s by 8.0%, underscoring the region’s diversification drive. Since 2020, companies in the region have recorded an impressive 11.5% compounded annual growth rate, further supported by record initial public offering (IPO) volumes and resilient mergers and acquisitions (M&A) activity.

 

Yet, the findings reveal a growing reliance on financing. Short-term debt rose by 23.8% in 2024, pushing interest expenses to a five-year high at 3.1% of revenue. Despite overall Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margins improving by 30 basis points, profitability remains under pressure from rising Selling, General and Administrative (SG&A) expenses and higher financing burdens.

 

PwC estimates that $54.7 billion remains trapped on the balance sheets of publicly listed companies, representing a major opportunity to unlock cash and strengthen balance sheets. However, just 9.4% of companies in the study sustained improvements in NWC days for three consecutive years, pointing to challenges in embedding long-term efficiency.

 

Mo Farzadi, Partner, Performance and Restructuring Services Leader, PwC Middle East, said: “In a year marked by heightened geopolitical uncertainty and supply chain disruption, effective working capital management remains a strategic priority in the Middle East. Companies that take a disciplined approach to cash conversion can unlock liquidity, build resilience, and respond more confidently to market pressures. Sustainable improvements in working capital continue to be a powerful enabler of growth and long-term value.”

 

Priorities for 2025

PwC’s study recommends five key actions for Middle East corporates to build resilience and unlock value in the next 12 months:

* Get the basics right – Fix foundational gaps in invoicing, stock visibility and payment processes.

* Measure and cascade KPIs – Link strategic targets to day-to-day operational metrics.

* Tailor systems and AI to real needs – Align technology with actual working capital drivers.

* Use working capital to reduce debt – Free up internal cash to lower reliance on external financing.

* Embed a cash culture – Build ownership and financial discipline at every level of the business.

 

PwC states that as capital costs remain elevated, working capital efficiency must be treated as a long-term capability rather than a short-term initiative. Companies that invest in sustained improvement will be best positioned to strengthen balance sheets, improve resilience, and unlock future growth opportunities. - TradeArabia News Service