Business confidence fell sharply in fourth quarter of 2008

But the quarterly HSBC Gulf Business Confidence Survey has also revealed sharp intra-regional differences in business sentiment.

While sentiment in Qatar and Saudi has shown a more gradual decline, business outlook in the UAE has shown the steepest fall, to 62.2. But within the UAE itself there are sharp distinctions: 43% of business is optimistic about revenue growth in Abu Dhabi, compared to just 26% in Dubai; while negative sentiment about meeting budgets is twice as high in Dubai as in Abu Dhabi (35% in Dubai vs 17% in Abu Dhabi.)

"Perhaps we should not be surprised that we have seen such a steep fall in outlook, since confidence has been sky high for the past five years while the region has enjoyed a booming economy. We have witnessed the steepest falls in Dubai, but it is Dubai that has succeeded in becoming the service centre for the Gulf, and it is service-led economies that are most vulnerable to a slow-down,"

said Keith Bradley, Head of HSBC Commercial Banking for the Middle East.

The fourth quarter survey plumbs new depths in sentiment:
• Only 31% expect to see any growth in turnover (compared to 57% in Q3)
• Only 10% predict profits to grow by more than 15% (19% in Q3)
• 12% of business plan to shrink their investment budget this year, compared to only 4% three months ago.

"The change in sentiment has been steep and rapid," said Declan Hegarty, Co-Head of Global Banking at HSBC. "Our clients are telling us that while they predict a marked slow-down in activity in 2009, they also remain confident that business and trade in the region will continue, albeit at a reduced level from recent years. This is a slowdown, not a halt."

"The challenge for Gulf business is to stay competitive and to see out this slowdown," Hegarty added. "While we are under no illusions about the seriousness of this indicator, HSBC is also committed to helping its customers through tough times, as it has done in the past."

In another blow to confidence levels, the majority (59%) of business people see the current economic difficulties lasting for longer than a year, with 16% predicting more than two years of difficult times to come.