A majority of small- and medium-sized enterprises, or SMEs, in the UAE are planning to increase their headcount due to strong growth indicators on the economic front in the country, according to a survey.
Gulf Finance Corporation, or GFC, which compiled an inaugural SME Sentiment Survey in the UAE for the January-March quarter, said 77 per cent of SMEs will recruit more staff, while only one in five is considering retaining the same strength in the second quarter of this year.
Of those hiring, the top three sectors are logistics (13 per cent), retail (12 per cent) and finance (12 per cent).
The wholly-owned subsidiary of Shuaa Capital and a leading provider of finance to SMEs, said 93 per cent of survey respondents are either positive or very positive on their growth outlook. Of those, one in four is employed at companies with 20 to 50 employees and 60 per cent have a turnover of between Dh1 million and Dh5 million.
The survey, which was conducted during early March and mid-April, said about 90 per cent of the surveyed people are expecting sales in their company to rise, with over one in two forecasting it to be between one and 20 per cent.
“These findings suggest that the SME sector in the UAE is feeling optimistic. The respondents have experienced markedly improved payment collections, a rise in orders and production, increased recruitment and considerably better access to finance,” David Hunt, chief executive of Gulf Finance, told Khaleej Times.
Anticipating a good time ahead, about 63 per cent of respondents said they are planning on expanding their product range, with the top two sectors being logistics (15 per cent) and finance (13 per cent). Approximately 20 per cent are planning to expand into new geographies to grow their businesses in the region.
Referring to International Finance Corporation (IFC) and McKinsey report on the SME banking opportunity in the Mena, Hunt said there are an estimated 19 million to 23 million SME and micro businesses in the region.
“In the UAE, we have around 200,000 SMEs accounting for nearly 86 per cent of private-sector employment,” he said.
To a question about the challenges facing the sector, he said one of the key constraints on the part of SMEs in obtaining financing has been their inability to provide adequate financial information and accurate historical data that is needed in order to be able to make a credit decision. “Over recent years, we have seen an improvement in this regard and will have positive impact.”
First-quarter review
While reviewing the January-March quarter, the survey said a total of 85 per cent of SMEs confirmed orders and production increased or significantly increased during the last quarter. Only five per cent respondents said their orders were down while 10 per cent sustained the same business.
Three out of four businesses have increased their headcount; 41 per cent of the respondent added more than five people and a further 38 per cent recruited between one and five people. In total, three out of four firms hired during the first quarter.
Approximately 70 per cent of SMEs saw a noticeable improvement in payment collection, specifically SMEs with a turnover of between Dh1 million and Dh10 million, which were three out of four respondents, according to the survey.
In another segment, nine respondents out of 10 claimed their ability to raise finance had markedly improved since the turn of the year. Interestingly, the highest respondents were found to be those with between 20 to 50 employees (27 per cent) or with a turnover of between Dh2 million and Dh5 million (31 per cent), indicating the trend that well-established or high-growth companies are benefitting the most.
“The key takeaways are twofold; firstly an increase in confidence in the overall health of the UAE’s economy; and secondly, an increase in funding solutions to the sector as financing companies gain comfort in the fact that SMEs are witnessing a noticeable improvement in payment collection,” Hunt said.
