Dubai: Faced with financial constraints, a number of small businesses in the UAE are putting off plans to recruit new staff, launch new products or open additional shops, a new survey showed.
Gulf Finance has recently polled some small and medium enterprises (SMEs) in the UAE to gauge overall business sentiment amid the current economic climate. Several businesses reported having difficulty borrowing or securing loans and getting paid by their clients.
About seven in ten (74 per cent) said that as of the fourth quarter, they were struggling to raise finance, while about a third (29 per cent) reported that their payment collection over the last three months had further deteriorated.
Analysts, however, maintained that the fundamentals of the UAE market remains strong and that there are still opportunities for growth.
“The last quarter of 2015 witnessed a significant increase in negative sentiment sweeping the SME market. After a strong start to the year, UAE-based SMEs rapidly struggled to raise and collect money, pushing plans to recruit, launch products or open new outlets aside” said David Hunt, CEO of Gulf Finance.
“As we’ve entered 2016 it is clear that the UAE’s SME market will continue to face similar challenges as seen in the second half of 2015. With a low oil price, slowing economic activity and lower levels of liquidity, SMEs are likely to continue to feel the impact on their business activities."
The persistent decline in oil prices has affected the fiscal balances of countries in the Gulf Cooperation Council (GCC). The price of oil has dropped by more than half since September 2014.
Among those feeling some impact, banks in the UAE have reduced their headcount recently. First Gulf Bank had cut about 100 positions, while Standard Chartered and HSBC reduced their workforce by 100 and 150, respectively.
The job cuts were announced after the balance sheets of most of the country's banks showed slowdown in deposits and decline in credit/asset mix.
More job cuts?
According to Gulf Finance, the number of small businesses planning to either maintain or cut down their workforce in the coming three months increased to 50 per cent in the last quarter from 32 per cent in the previous quarter.
Among the respondents questioned for the survey, about half (50 per cent) said they are planning to either maintain or reduce their headcount in the coming three months. The remaining half may consider hiring strategically.
The numbers contrast sharply with the first two quarters of 2015, when 84 per cent and 72 per cent of respondents in the first quarter and second quarter, respectively, saying they had plans to expand their workforce.
Despite indications suggesting that 2016 will be a challenging year for SMEs, the overall sentiment among small businesses remains cautiously optimistic with 50 per cent of SMEs saying that they are feeling slightly positive, while 25 per cent remain neutral and 12 per cent are negative. Only 8 per cent stated that they have a very positive outlook and 4 per cent are unsure.
“The fundamentals of the UAE market remain strong and there is opportunity for growth, despite the current prevailing negative sentiment among business owners,” added David Hunt.
”Going forward it will become increasingly important for SME’s to be flexible and adapt to the changing market environment, and to maintain an open dialogue with financiers.”
