An inaugural survey into sentiment among the UAE’s small and medium enterprises in the first quarter is largely positive.
Large majorities of SMEs surveyed by Gulf Finance, which specialises in lending to small businesses, said that orders, production, payments and access to capital had all improved since the beginning of the year.
Optimism about the future was widespread. Almost all respondents said that they expected business to grow and sales to rise.
“These findings suggest that the UAE’s SME sector is feeling optimistic,” said David Hunt, the chief executive of Gulf Finance. “[That is] an encouraging development given the importance placed on the sector by the government. “The respondents have experienced markedly improved payment collections, a rise in orders and production, increased recruitment and considerably better access to finance.”
A large majority of SMEs said they were planning to increase hiring. Logistics, retail and financial firms are set to experience the biggest increases in hiring over the next quarter. The financial sector posted the largest number of online vacancies of all industries in March, according to the monthly Monster employment index. Only about one in five SMEs said they were likely to boost wages over the next quarter.
This tallies with recent survey data from the recruitment agency Hays, which found there was a significant mismatch in employee and employer expectations of likely wage increases over the next year. Employees expect double-digit pay rises over the next year, Hays found, while employers expect wage rises of 3 to 5 per cent. The UAE Government has sought to promote SMEs as part of its efforts to diversify the economy away from hydrocarbons.
A Companies Law passed this month aims to improve the business environment for small firms. The law introduces limited liability partnerships for individuals, in a bid to reduce risks faced by entrepreneurs when launching new ventures.
In March, the Minister of Economy Sultan Al Mansourri said that the government planned to relax foreign ownership restrictions outside free zones for some sectors.
But the lack of a legal framework for insolvency, complicated company registration procedures and the costs of regulatory compliance make life harder for SMEs in the UAE, according to the World Bank. While the UAE is ranked 22nd globally on the World Bank’s Ease of Doing Business Index, the country performs less well in terms of starting a business, where it is ranked 58th.
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