Middle East SMEs report high levels of business confidence

Including data from the UAE for the first time, the study shows a positive outlook for all Middle Eastern countries surveyed; with Saudi Arabia second in the overall global country rankings (after Vietnam), and the Middle East region scoring higher than the aggregate scores for Emerging Markets, Developing Markets and the overall global figure, for the second time.

The bi-annual HSBC Small Business Confidence Monitor gauges the outlook of SMEs on local economic growth, capital investment plans and recruitment. The latest wave is the largest international survey of its kind covering over 6,300 SMEs across 21 markets in Asia, the Middle East, Europe, North America and Latin America.

Saudi Arabia registered a score of 145, the highest in the Middle East and second highest in the world after Vietnam. Business confidence among Qatar's small and medium-sized enterprises (SMEs) reduced from a high of the inaugural results of 159 in 4Q09 to 137 in 2Q10. This was a relatively significant correction but still very positive overall, and above the global (118) and regional (132) averages. With a score of 120, the UAE is in line with Emerging Markets, while Egypt maintains its position between the global and developed markets with a score of 116. All four Middle Eastern countries surveyed have remained in positive territory throughout 2010.

"These results demonstrate that confidence remains steady amongst SMEs in the Mena region, and I'm delighted to see the Middle East remain one of the top regions surveyed," commented Simon Vaughan Johnson, Head of Commercial Banking, HSBC Mena. "Across the region, our Business Banking teams are reporting a return to confidence after an uncertain 2008 and 2009. The data shows that regional SMEs are increasingly looking at international trade for new markets and opportunities, with the majority of Qatari and Saudi Arabian SMEs reporting international activity. Increasingly, these companies are looking east for business development, with China leading the rankings as the first international market of choice for the UAE, Saudi Arabia and Qatar; and third highest market for Egyptian SMEs."

Global levels of confidence

Most markets across the globe held a positive outlook, with Turkey leading at 138, followed by the Middle East (132), Greater China (121), India (121), North America (119), South-East Asia (119), Latin America (118) and UK/France (99).

Compared to the previous results in 4Q09, Turkey showed the biggest jump in confidence up 21 points, followed by North America (up 12 points) and the Middle East (up 7 points).

Simon Cooper, CEO, HSBC Mena, commented, "The economic contribution of small businesses is significant for long term development, particularly in an entrepreneurial, trade-orientated region such as the Middle East. I believe that the feedback we are hearing from small businesses surveyed is a positive signal, as the Middle East continues to establish itself as a region of significance in the global economy."

UAE Highlights

Outlook on local economic growth
In terms of economic growth, 40% of SMEs in the UAE are still expecting the pace of the general business environment, as measured by economic growth, to increase.

Globally, over a third (34%) of SMEs are expecting growth to increase over the next six months, and half (50%) are expecting the current pace of growth to maintain. In Turkey, 56% of SMEs expect the pace of growth to increase, as do 49% in the Middle East, followed by South-East Asia (47%), North America (30%), Latin America (28%), India (27%) and Greater China (24%). In Western Europe, only 10% expect the pace of economic growth to increase.

Outlook on capital expenditure
42% of UAE based SMEs are planning to increase their capital expenditure plans over the second half of the year, with a further 42% looking to keep it at the same levels. The majority (87%) of SMEs across the globe are planning to increase (41%) or maintain (46%) their current capital expenditure plans in the next 6 months. The leading regions planning to increase capex include Turkey (52%), Middle East (50%), South-East Asia (46%), Latin America (43%) and Greater China (36%).

Outlook on recruitment plans
A quarter of UAE SMEs (25%) will expand their workforce, with 69 planning to keep current staffing levels, and just 6% considering decreasing their current workforce. 95% of global SMEs will either expand their workforce (26%) or maintain their current staffing levels (70%) in the next six months. Only 5% are planning to cut staff. Notable hiring increases are planned by 41% of SMEs in Turkey, 35% in the Middle East and 31% in South-East Asia.