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Wed 31 Aug 2016 01:45 PM

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Hiring freeze puts brakes on UAE small business growth in Q2

Gulf Finance SME survey also reports higher optimism and sales, plus easier fundraising

Hiring freeze puts brakes on UAE small business growth in Q2

A more optimistic outlook and higher orders for small businesses in the UAE are being offset by a continued freeze on recruitment, research released on Wednesday said.

Gulf Finance’s second-quarter sentiment survey showed that only 14 percent of respondents hired more staff during the period, while just 18 percent planned to do so in the third quarter.

The firm, a division of investment house Shuaa Capital, said these figures were near record lows since the survey started.

Just 4 percent of respondents said they had plans to expand geographically during the third quarter, while only 2 percent said they were likely to open up new outlets.

At the same time, respondents said they were more optimistic about the outlook for the next three months, with 85 percent saying they were positive. Only 10 percent said their outlook remained unchanged, while 3 percent projected negative growth (down from 4 percent in the first quarter).

There was better news on the sales front, with 77 percent of respondents reporting that orders during the second quarter were higher. That compared to 62 percent in the first quarter.

In addition, four in five respondents said that they found it easier to raise funds during the period, a significant rise on the 48 percent figure for the first quarter. Gulf Finance said that this was likely due to local banks restarting their lending after a tough first quarter.

“Despite the cautiously optimistic outlook suggested by our second quarter SME Sentiment Survey and noticeable increase in lending by local banks, we still feel there is a large amount of stress in the system. Despite the market normalising after a weak first quarter, it remains challenging,” David Hunt, the CEO of Gulf Finance, said in a press statement.

“Recruitment is falling short, dampening enthusiasm for business expansion. Growth expectation will remain modest until the year end unless companies unlock their hiring freeze.”

Small businesses in the UAE have been struggling to cope with the economic conditions brought on by the effects of the oil price. In particular, they have suffered from a drop in lending thanks to tighter liquidity in the banking sector, as well as delayed payments from suppliers.

Earlier this week, the sector received a fillip when the organisers of the Dubai Expo 2020 showcase said that 20 percent of its total and indirect spend – amounting to around $1.36 billion – would be allocated to SME firms both in the UAE and abroad.

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Telcoguy 4 years ago

Last week we had 3 in 4 companies thinking about international expansion, today we have this:
“Recruitment is falling short, dampening enthusiasm for business expansion. Growth expectation will remain modest until the year end unless companies unlock their hiring freeze.”
Oh well.