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GCC business confidence on a high
The Gulf's first ever business confidence survey has revealed an extremely positive outlook in the GCC market with over 50% of companies expecting to increase their investment over the next three months.
The first quarterly HSBC Gulf Business Confidence Index compiled in conjunction with polling organisation YouGov Siraj, questioned 1000 companies across the GCC, including 245 businesses with over 1000 employees, and found that 53% of businesses said they would increase investment in 2007, 59% expect profits to rise, while 66% expect turnover to rise in 2007.
72% of businesses said they expect revenues to increase in the next quarter, almost one in four (24%) said corporate profits would rise by more than 15%, while over half (54%) expect an expanding market to be the prime business growth driver, with only 5% citing merger and acquisition activity. GCC business people, however, were also found to be acutely aware of the risks that they may face in the future. Constraints on human capital, increasing competition and high inflation were all quoted as potential threats to commercial success. 48% of businesses see inflation as a threat, however only 28% of Saudi businesses view inflation as a worry factor, while the reverse took place in the UAE with 55% concerned with rising prices in areas such as commercial property rental. Staffing was also perceived to be a challenge, with over one in three (35%) having a negative outlook on keeping up with staffing requirements in their business.
The rising cost of real estate was also cited as having a negative business impact by 47% of respondents, while more than one in three (36%) saw a downside in the rising cost of raw materials to their business. Keith Bradley, regional head of commercial banking for HSBC Middle East, told Arabian Business that the growth story was "strongest in the UAE and Saudi Arabia".
"There are distinct differences between the two. Saudi is less worried about competition and less concerned with inflation, while Dubai is the opposite with prices for rental premises rocketing and the frenetic pace of business continuing with more competition entering the UAE market." Bradley added that the most positive aspect from the survey was that the state of mind of the region's business community was "positive, but not unrealistic". "The region's businesses have a broadly upbeat outlook, but one that is acutely aware of downside risks to business, whether that is inflation, raw material pricing, staffing or political risk."
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