UAE businesses see profitability returning to pre-coronavirus levels by 2022

Overall, UAE companies have a more optimistic and positive outlook than the global average – which came at 80 percent for profitability levels and 67 percent for optimism – because of the way the government handled the pandemic and its recent business-friendly initiatives, says Daniel Howlett, HSBC’s regional head of commercial banking, Middle East, North Africa and Turkey (MENAT).

“We’ve seen many positive regulatory changes in the UAE, particularly with the ability for a 100 percent foreign ownership, reforms on the family and criminal law, the visa programmes etc.  Also, the reality is that the UAE has had a very good Covid performance especially when it comes to screening per capita,” said Howlett.

“As the economy recovers, Dubai, Abu Dhabi and the wider UAE continue to attract investments and I think I am right in saying it remains at the top 20 from a world-ranking perspective for foreign direct investments. All of these are very favourable elements,” continued Howlett.

Howlett was speaking at a media roundtable on Sunday, discussing the results of HSBC’s annual Navigator survey, which gauges sentiment and expectations of businesses in the near to mid-term future. This year, HSBC surveyed 10,000 companies globally, including 700 from the Middle East.

The survey revealed that businesses in the UAE recognise the need to invest for future growth, with 81 percent of respondents intending to increase their investment in their business next year, compared to 67 percent globally. The three most commonly cited investment priorities are product and process innovation, marketing and customer experience.

While Saudi Arabia offers the greatest levels of investment going forward, both the UAE and Egypt are not far behind, said Howlett.

“The reality is that the Covid pandemic has compelled companies to adapt to survive. The ones who were most successful this year are the ones who are innovating and investing in the long term,” said Howlett.

“As Winston Churchill famously said: ‘You should never let a good crisis go to waste’, and we certainly feel that our customers in the Middle East are making sure they are adapting and growing going forward,” he continued.

While 74 percent of businesses from the UAE feel that international trade has become more difficult due to the impact of events in the last 12 months, their commitment to pursuing overseas opportunities appears undiminished, according to the report.

When asked about their outlook on international trade, 90 percent of UAE companies said they have a positive outlook over the next two years, compared to 72 percent globally.

Investments in digital technology and sustainability in the UAE are on a growth trajectory as well, according to Howlett.

“The conversations we are having now are very different from the ones we were having six months ago. If you think of back in June, at the height of the pandemic, there were a lot of concerns about cash flow pressures, customers not paying, the difficulties in sourcing supplies, etc. But, now customers are talking about how to expand and what they can do to grow through the use of digital technology; they are looking at what in-house digital offers can be made available by banks,” said Howlett.

“We have seen a huge amount of our customers migrate to digital payment technologies in 2020. We are also seeing investments in sustainable finance opportunities,” he added.

A focus on sustainability is a key driver for the UAE going forward with 99 percent of businesses surveyed in the country seeing multiple opportunities for improving their environmental and ethical sustainability; the highest in the world.

Over 85 percent of companies in the UAE have set targets for a broad range of aspects of environmental, social and governance issues and more than four-fifths are measuring environmental and social aspects of sustainability, according to the survey report.