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Thu 12 May 2016 11:51 AM

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SME headcount flatlining as UAE economy slows

82% of SMEs plan not to recruit new staff in the next quarter, Gulf Finance survey says

SME headcount flatlining as UAE economy slows

The sluggish economy is continuing to hit small-to-medium-sized businesses (SMEs) in the UAE, with one in four finding it harder to collect payments and more than 80 percent deciding not to hire new staff over the next quarter, according to a survey.

As the regional economy slows, SMEs are reporting collections, payments and ability to access finance as the main issues hampering their growth.

Gulf Finance Corporation’s latest SME Sentiment Survey for Q1 2016 shows that 23 percent are finding it difficult to collect payments, down slightly from the 29 percent reported in Q4 2015.

Late payment remains an issue for SMEs – as does their ability to raise capital as banks remain cautious. However, respondents reported a moderate improvement in access to finance over the past three months and only 16 percent reported weakness in the market as opposed to 36 percent in the previous quarter.

The survey found that only one in six SMEs said they would be looking to hire more staff in the next quarter – with 82 percent declaring they would keep headcount the same, 67 percent higher than the Q4 2015 figure.

However, 41 percent of respondents said they had increased their headcount during the previous quarter and that they had no plans for layoffs.

The research showed there was a rebound in company’s ability to raise funds in the past quarter, with 48 percent of SME respondents claiming they had seen an improvement. Almost two-thirds (62 percent) also saw an increase in sales, up from 49 percent the previous quarter.

The negative growth outlook and sales forecast reported in Q4 2015 appears to be lessening as sentiment turns cautiously positive, the survey said. Three-quarters (78 percent) of SMEs said they envisaged positive growth in the coming quarter – a 20 percent increase on Q4 2015. Nearly half of respondents claimed they would invest in their businesses over the next quarter.

David Hunt, CEO of Gulf Finance, said: “The UAE’s SME market appears to have weathered the trading difficulties it faced towards the end of 2015. Our survey has signalled a cautious return to growth and a more positive outlook on revenue and sales. Total orders and sales forecasts are both above the 50 percent mark while growth outlook is 78 percent positive.”

“However, we are not out the woods yet. Appetite for recruitment remains weak amongst SMEs, with 58 percent reporting no additional headcount on a quarterly basis and 82 percent claiming they would not be hiring next quarter.

“The good news though is that almost no companies plan to decrease their staff numbers. So while business may not be booming, it is staying at a level that does not require layoffs.”

The research was based on responses from over 200 small businesses in the UAE.