15% of firms may 'go under' next year

Over 40% of businesses in the UAE expect to either stand still or go backwards in 2008, citing currency weakness, rising costs and increased competition as the major contributors to the erosion of their bottom line, according to a new poll.

Around 17% of respondents to the latest ArabianBusiness.com survey said their business will remain stagnant in the New Year as rising costs nullify anticipated turnover growth, while more than a quarter of those polled expect their company to slide backwards.

A staggering 26.6% said their business would be in worse shape in 2008, saying “we’re being hit on all fronts - currency weakness, inflation and increased competition.” A further 14% think their business will be “much worse” and hold out little hope for lasting the year.

Less than one-fifth of those polled by Arabian Business anticipated their company to perform “much better” in the New Year. Those that did said they would be adding new staff and capacity to meet demand.

Just over one-quarter said they expected better growth but that it would be “tempered by higher costs”.
Nasser Saidi, chief economist at Dubai International Financial Centre, warned of the potential failure rate among family business when he spoke to ArabianBusiness.com in November.

“Family businesses need to ensure their wealth survives into the future.” Saidi said. “At the moment 80% of the businesses don’t survive into the 3rd generation.”

Saidi is the executive director of Hawkamah, a corporate governance group focusing on enabling adequate framework to sustain the rapid economic expansion in the Emirates.

Growth in gross domestic product (GDP), a broad measure of the strength and growth of an economy, is running at around 10% in the UAE, but is tempered by skyrocketing inflation, which hit a 19-year high of 9.3% in 2006 and is expected to top 10% this year.

In total 636 people answered the ArabianBusiness.com poll.