Great escape? The UAE expat's dilemma

The slowing economy has left ripples of uncertainty across the Gulf, hitting the job market and causing living costs to escalate. For many people who moved to the UAE to cash in on its abundant prospects, it no longer makes sense to stay


The UAE has been attracting millions of the world’s modern-day Dick Whittingtons — the English folklore character that left behind a humble background to seek his fortune — for decades.

Lured by the prospect of a tax-free salary, abundant job opportunities and relatively high standard of living, foreigners have come to the UAE in droves and made it their home.

An estimated 7.8 million of the country’s 9.2 million population are expats, according to the latest estimates, with Emiratis making up just 11 percent of the total.

The UAE is considered the most liberal country in the Gulf and many expats use it as a base from which to commute to jobs in more conservative countries such as Saudi Arabia and Kuwait.

Thousands of other expats work in well-paid jobs in the UAE itself and enjoy a lavish and cosmopolitan lifestyle.

Many others leave their families behind and work as taxi drivers and construction labourers, earning higher wages than they would back home so they can send their children to school.

However, with a steep rise in living costs, increased efforts to nationalise the workforce and persistently low oil prices, changes are afoot. Many expats are leaving the UAE, by choice or otherwise, amid increasing economic uncertainty.

“The whole region is in tailspin,” says a Dubai-based recruitment consultant who wishes to remain anonymous. “Expats are choosing to leave the UAE because it has become too expensive for them or they are worried about job security.

“For some, the decision is being made for them. Companies can no longer justify paying big salaries to Western employees and are looking to recruit from elsewhere to cut costs. Or, they are simply downsizing.” Placements by his firm are down 60 percent year-on-year, the recruiter says.

Credit management company Coface claimed in July that it recorded a total of 239 runaway, or ‘skipping’, companies, that fled the UAE to avoid paying debts, between July 2015 and March 2016.

The International Monetary Fund (IMF) in April downgraded the UAE’s GDP growth forecast from 3.9 percent in 2015 to 2.4 percent in 2016. The figure is healthier than for other countries in the Middle East that are more dependent on oil revenues — Saudi Arabia’s GDP growth is expected to rise by just 0.8 percent this year —but the knock-on impact of the regional economic slowdown is taking its toll.

Oil and gas, construction and related industries have been especially hard hit. Abu Dhabi’s state-owned National Oil Co (ADNOC) plans to cut 5,000 of its 55,000 staff by the end of the year. In neighbouring Qatar, state-run Qatar Petroleum laid off 1,000 foreign workers this year as part of restructuring, while pan-Arab TV news station Al Jazeera closed its American channel in April and laid off around 500 staff, most of them in Doha.

In Saudi Arabia, thousands of jobs are being axed at construction behemoths such as Saudi Oger and Saudi Binladin Group, two of the biggest expat employers in the region. And in Oman, thousands of labourers are being sent back to their home countries due to a lack of projects, with one anonymous manager telling a newspaper in June that his camp in Sohar had gone from 800 to 12 workers in the space of a few months.

With governments and companies terminating contracts across the region, global service providers such as engineers, bankers, lawyers and consultants — many of which use the UAE as their Middle East base — are at the sharp end of retrenchment plans. Meanwhile, living costs are rising. Mercer’s Cost of Living Survey 2016, published in June, ranked Dubai the 21st most expensive location out of 205 global cities, up from 23rd in 2015 and 67th in 2014. Abu Dhabi was ranked 25th, up from 33rd in 2015. Housing and utility costs in Dubai have risen by 3.9 percent since last year and food and drinks by 3.5 percent, according to the Dubai Statistics Centre (DCS), while inflation rose to 1.75 percent in the first half of this year.

Personal debt is mounting — banks are hiring debt collectors to chase expat defaulters and banking experts estimate that small business owners fled the country last year with unpaid debts totalling AED5bn ($1.4bn).

The story of expats abandoning their cars at Dubai airport in 2009 when the global financial crisis hit is well remembered by many. But recruiter Trefor Murphy, CEO of Cooper Fitch, warned in June there could be a fresh exodus of expats as the oil price slump sends ripples through the region.

While any move to quit the UAE is undoubtedly less dramatic now than it was in 2009, many people working at the coalface of expat life tell Arabian Business there has been a noticeable increase in the number of people leaving within the past 12 months.

Bana Shomali, CEO of MoveSouq.com, which provides online bookings for moving and home services, says international moves from the UAE is the fastest growing segment of the business, with enquiries growing 70 percent from January to June 2016 and 100 percent year-on-year since June 2015.

Saudi Binladin Group has laid off about 77,000 foreign employees.

“We don’t ask people the reasons [why] they are leaving, but anecdotally people are saying it has to do with continued uncertainty in the job market,” she says. “Even if people have not been made redundant, there’s talk of layoffs every day and people are nervous.

“We are definitely seeing more people leaving compared to the same time last year, and this seems to be consistent with reports from the relocation companies we deal with.”

Abhilash Nair, regional manager of the removals division at ISS Worldwide Movers, says requests for outbound (international) moves increased by 20-25 percent between July 2015 and July 2016. There has been a smaller increase in inbound requests, of around 10-12 percent.

“The increase in outbound moves seems to be mainly due to layoffs happening in oil or related industries, although the high cost of living and children’s education when compared to many European countries is another factor,” he says.

The cost of education was up 5.79 percent in the first half of 2016 compared to the same period last year, according to DSC. Sources claim schools are experiencing a 3-5 percent drop in new registrations for the 2016/17 academic year, in part driven by a rise in families leaving the country.

Garrett O’Dowd, Dubai-based co-founder of recruitment agency Teach and Explore, says he has seen “first hand” the impact of redundancies on expat families and some of his friends have left the country after being laid off.

Many of Teach and Explore’s clients (major schools across the UAE) are struggling to fill classrooms as a result. “Our schools across the board have seen student numbers decrease, which in turn has led to a smaller number of teachers being needed,” he says.

“Some schools have cut salaries and headcount to compensate and for the first time in years, we have seen a slowdown in the education sector and a general uncertainty that has led to teachers looking for positions back home.”

O’Dowd says four of Teach and Explore’s client schools have cut recruitment by 60 percent this year and have told him they expect similar numbers next year. “We have six other clients who were in advanced stages of planning to open more schools but have held back now.

Al Jazeera Network announced a 10 percent reduction in workforce.

“In some of our schools, registration is down by 5 percent, although principals are hoping this is just late registration.” He says the more positive oil outlook in recent weeks has resulted in a slight increase in student registrations “as families who were previously uncertain of their future have had their contracts renewed”.

A source from the American School of Dubai says withdrawal rates (the number of students taken out of the school) are running approximately 2-3 percent higher than in previous years. This does not necessarily mean families are leaving the UAE, the source says, but concedes: “We believe it is due to segments of the economy that are experiencing stress as a result of broader world economic developments.”

The total number of new teachers registered in Dubai’s private schools has dropped from 7,393 in the 2014/15 academic year to 7,212 in 2015/16, according to figures from the UAE’s Knowledge and Human Development Authority (KHDA), but a spokesperson was optimistic: “There has been no major decline in the recruitment of teachers, and with more than 15 new schools slated for opening in the 2016/17 academic year there will be more teachers expected to join.”

One sector with valuable insight into corporate recruitment practices is human resources. Amy Baxendale, senior employer solutions manager for the GCC & Middle East chapter of trade body the Chartered Institute of Personnel and Development (CIPD), says members are increasingly talking of workforce “rightsizing”, hiring freezes and salary reductions at the companies for which they work. Firms are dealing with a rise in repatriation as a result, she says.

HR professionals themselves are struggling to find new opportunities in a flat job market made even more challenging by UAE efforts to nationalise the workforce, Baxendale adds — insisting that CIPD fully supports the government’s Emiratisation strategy.  “Expats working in the government sector in particular have known for a while they may lose their jobs to Emiratis in the next three years. But the government has escalated plans and some people are finding themselves without jobs earlier than anticipated.”

Baxendale is unable to provide figures, but says CIPD Middle East’s annual membership report this autumn may give some indication of the scale of any decline in HR professionals working in the region.

The absence of official statistics showing expat arrival and departure patterns in the UAE makes it difficult to calculate the number of departures without caveats. For example, many would-be expats arrive on a tourist visa that they later convert to residency. The closest statistical picture available at the time of writing came from immigration services firm Fragomen, which compiled figures exclusively for Arabian Business indicating an overall increase in residency visa cancellations between 2015 and 2016.

In July 2015, visa cancellations accounted for 31 percent of the firm’s total caseload compared to 48 percent in July 2016 — a 17 percent increase year-on-year, the figures show. At the same time, the number of new residency permits dropped from representing 69 percent of cases in July 2015 to 52 percent this year (see table). July figures were used as that is the peak month for arrivals and cancellations ahead of the academic year, Fragomen says.

The figures do not include visa renewals or dependents’ cases, but they do include new permits for those already living in the country as well as those applying from overseas. The client database comprises companies from all industry sectors, not just oil and gas.

ADNOC plans to cut 5,000 jobs by the end of the year.

Fragomen’s research reflects what UAE recruiters are seeing — a flatter job market with an increase in people leaving some industries but the number of new arrivals generally holding up. Murphy at Cooper Fitch tells Arabian Business recruitment market growth stagnated at around -2 percent in the first half of this year but is expected to pick up to 2-3 percent in 2017, assuming oil prices recover to their forecast $55 per barrel.

Most of the oil and gas redundancies have already taken place, he says — the UAE’s oil workforce has contracted by around 50-60 percent over the past two years but related services have taken a hit in the past year. The UAE’s banking workforce has shrunk by around 10-15 percent in the past 12 months, and in the past three months manufacturing and other oil and gas services have seen a workforce reduction of around 2-3 percent. The food, farming, aeronautical and technology sectors are doing very well, Murphy adds — “there are some green shoots”.

Suhail Masri, vice president of employer solutions at UAE jobs website Bayt.com, says: “While the decline in oil prices has led to a sense of ‘watch and wait’ and lowered recruitment activity in some sectors, jobs on Bayt.com have not registered a shock and hiring levels in the UAE are somewhat consistent with hiring levels last year.

“[In the UAE], we have more than 4,000 job vacancies on our website on any given day, and 26 percent of UAE respondents to our Consumer Confidence Index survey in March said they thought the country’s economy had improved in the past six months, with 48 percent saying they thought it would continue to do so.”

Dubai Expo 2020 is one of the driving factors for this optimism, says Masri. The event is expected to lead to an increase in development projects in the country, creating more than 277,000 new jobs and boosting industry.

Some people report no ‘expat exodus’ at all. Radha Stirling, founder of lobby group Detained in Dubai, says: “We have not received any clear indication from expats that they are seeking to leave the UAE as conditions in their own countries are not necessarily superior.

“However, the clear benefit in returning is that they might receive either family or governmental financial support. Expats are in a precarious position in that they usually have no backup or support, and in our experience unemployed expats struggle to survive more than ninety days without defaulting on rent and other obligations.

“What we have noted this last quarter is an approximate 20 percent increase in the number of queries relating to debt from expats still resident in the UAE.”

Jonathan Macpherson, deputy chairman and chief operating officer (COO) of the British Business Group, says group membership continues to rise by around 10-15 percent each year and there remain plenty of opportunities for British businesses in the UAE. “The majority of our members are small-to-medium-sized enterprises that would not need to make drastic reductions to headcount in leaner times.” The Brexit vote may also have dissuaded any British expat thinking of returning home from doing so, he adds.

It is estimated that expatriates account for more than 50 percent of the labour force in most of the GCC countries.

The medical profession appears to be somewhat cushioned from the economic slowdown. Kaneez Nabijee, CEO of recruitment and licensing body Doctors in Dubai, reports a rise in demand for doctors in the UAE — she says her client base has risen 50 percent between 2014 and 2016 as the government invests in the healthcare industry by building new hospitals and clinics. She notes a rise in UK doctors moving to the UAE because they hate working within the cash-strapped National Health Service (NHS), which is increasingly forcing doctors to work punishing hours for pitiful salaries.

And Kulwant Singh, president of the Indian Business and Professional Council (IBPC), says there remains strong appetite among Indian businesses to set up in the UAE. Membership has risen by 10-20 percent in the past 12 months, he says. “I know the economy is struggling but this is a global problem. If you run away from one country, you could find yourself in a worse situation somewhere else.”

Others have noticed a demographic shift towards fewer Western expats and more from Asia and the Arab world rather than an outright exodus. The anonymous recruiter says: “One reason Western expats have enjoyed Dubai is that they have been able to live in a style unaffordable and unimaginable at home — maids, big Jumeirah villas and so on.

“But those days are gone. Gulf companies are looking for alternative, cheaper sources of labour even if the skill set is less advanced. I think what we are seeing is a rebalancing of the market to more sustainable levels from one that has overpaid for many years.

New expats are far more likely to be single than married with children as companies seeks to cut down on visa costs, adds Brian Cummins, founder of expat support network Abu Dhabi Paddy. “It’s been a long time since the UAE was perceived as a ‘hardship’ posting when companies had to provide attractive school and living packages for new recruits and their families.”

Arabian Business contacted the UAE government’s communications office for comment and was transferred to the General Directorate of Residency and Foreigners Affairs, which was unable to provide comment in the time available. 

With its year-round sunshine, exciting lifestyle and business prospects the UAE is certain to remain a major destination for expats for years to come. It was ranked 19th in InterNations’ 2015 list of the 64 most popular destinations for expats, and 79 percent of survey respondents said they were either ‘very satisfied’, ‘satisfied’ or ‘mostly satisfied’ with life in the UAE. 

However, economic uncertainty in the region is clearly prompting significant structural shifts and more expats could be making life-changing decisions in the weeks and months ahead.

Moving in: Imran Serugo Lugo, business development manager at health insurance firm Lifecare International:

“I’ve always wanted to move to Dubai but the situation and timing had to be right, and the salary package had to be realistic for me to be able to live, not just work, here.

“I was at the British Medical Association in the UK before I moved and was at a point in my life where I needed to start looking to buy a property. My previous job had good career prospects, but house price inflation was rising quicker than I could save. So when the opportunity to work in the UAE, where it is tax-free and a better quality of life coupled with good career prospects, it seemed silly not to.”

Moving out: Amy Telling, 34, London:

“I moved to Dubai in 2013 because my job in financial services looked a bit iffy in the recession. My new job was in construction marketing but I realised that the change in industry and international move was extremely stressful. I was lucky to have great friends who helped me, as insider knowledge is crucial.

“Then, I lost my job last April and spent six months looking for work. I was lucky as my rent stayed the same but I heard lots of stories of landlords doubling rents on existing tenants. There was a definite feeling of expats being priced out and the job market had simply stopped moving. The recruiters I met in 2015 were struggling to collect the roles, and people were hunkering down and sticking at jobs they didn’t really like because so many others were losing theirs.

“I left in autumn 2015 when I had used up all the savings I had accumulated over the past three years. It was a hard decision to make but one I don’t regret. I had lots of good times in Dubai but I was fed up of always looking for cheaper deals.”

 

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Please post responsibly. Commenter Rules

Posted by: mcintosh

Doobye became a bit chavvy. Well I never.

Posted by: Fahd S

There needs to a study on the economic cost of laying off a white collar expat with a wife and 2 kids in school. The impact of that one family leaving the UAE would translate into one more residential unit adding to supply, 2 more vacant seats in school, the average grocery spend per month, the utility bills and so on. It would be worthwhile looking into a permanent residency for a select class of expats based on their education / skill, age and pay scale like being envisioned by Saudi for up to 30% of the expat force.

Posted by: MAM

I make a decent salary per month. I am just able to pay for a one bedroom (no, at 45 years old, I will not room with a group of people) and my bills and I am still barely able to continue to save to move home one day. My bills are not outrageous and I have no loans at all. So, this luxury lifestyle is long gone because to afford a 100-120k a year apartment plus the skyrocketing DEWA and ISP pricing (among others) is very difficult. So please don't paint Dubai lifestyle as extravagant because that level of salary to live that kind of life is far higher than it use to be. Every single element in Dubai is almost double. Parking, utilities, fines, salik, rent, food, fuel, entertainment. I hardly get out to do anything and try and save what I can. I don't know what those making half or even a quarter of my salary are able to do. Quite sad.

Posted by: Lord Spandex of Leisurewear

I am glad I left when I did, 3 years ago. They were just trying to spin up another property boom, rents and costs were getting unreasonable and it was like the country learned nothing.

I had saved a lot, moved back to Europe, bought a fantastic house for a fraction of the price of somewhere with very poor build quality in Dubai that I wouldn't really own. My kids go to a local school which is free and has a very good reputation, I and my family have access to an excellent health service. The culture is relaxed, the roads are safe, and we don't live in fear of overnight rule changes or legal issues from annoying the wrong person.

Best of all, my kids will grow up in a place they can think of as home and will have local nationality so will be first class citizens with a right to live here if they wish.

Posted by: Mark

Yeah yeah, good for you. Go enjoy your country and stop posting on Dubai threads yeah. Gotta love these people who benefit from Dubai and then act on their high horse from another country.

Posted by: Shanti

Unless the rules are changed, rents are reduced as per the paying capacity of the expatriates, school fees reduced, unnecessary new expenses pop up, this place no more has any charm to leave our home country and suffer. There is no permanency here. The rules remain the same for a 20 years resident and 2 months long resident. The rent, school fees and other costs remain the same for all, whereas the US, UK and Europeans besides Arabs are made a very very high salary package and the Asians and Africans who are the real work force are always considered third degree citizens. Unless the authorities look into all these, we ourselves will advise any of our people not to come here for greener pastures as there is none.

Posted by: GoodToGo

Well said, things have gotten crazy lately!

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