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Stability boosts business outlook in Dubai and brightens prospects for hiring and expansion

Stability and optimism seem to be the overarching sentiment among businesses in Dubai as almost all of them look forward to stable outcomes while also planning to hire and upgrade capacity as seen in the quarterly business confidence survey conducted by the Department of Economic Development (DED) from October to December 2013.

Reflecting a steady build-up in positive estimates the composite Business Confidence Index for the final quarter of 2013 rose to 144.3 points, up 8.4 points from the same period of 2012 and the 141.6 points recorded in the previous quarter. The overall business outlook for the first quarter of 2014 also improved with 63% businesses foreseeing better business conditions as against 58% for Q4 2013.

Overall outlook on sales continues to improve, with 97% businesses expecting either an increase or no change in sales volume in the next quarter, compared to 96% in the last quarter and 94% in Q4 2012. As 71% see no change in selling prices in Q1 2014, sales revenue estimates are evidently driven by higher sales volume expectations.

Consistent with the positive expectations on sales, 64% businesses are also planning to increase their new purchase orders in the next quarter, based on positive expectations of new project wins/increase in demand for products and services. For 33% of businesses current stocks and purchase orders from the previous quarter are adequate to meet demand.

Profitability estimates are also in line with the overall sales expectations, as 62% see stronger net profits based on anticipated demand and improved margins. Like in the previous two quarters, larger firms look more confident than their smaller counterparts as their index score is 151 compared to 134.3 for the small and medium enterprise (SME) segment. The high confidence among larger firms stems from their brighter outlook on selling prices and hiring.

Among the key sectors, manufacturing companies (71%) are more optimistic with respect to sales volume and purchase orders, while service firms are more optimistic on selling prices, hiring and profits. Among services companies 67% expect increased sales volumes while the corresponding share among trading firms is 59%.

The steady rebound in the real estate sector and growing anticipation of new projects, especially following the Expo 2020 announcement, has resulted in rising optimism among architecture and real estate while 88% of restaurants and hotels also foresee stronger outcomes from tourist influx during January – March 2014.

Driven by increased demand from all major sectors during this period, 64% of the transportation companies also foresee more contracts in the coming quarter.
A comparison between exporters and the overall business community in Dubai shows that exporters are less optimistic (134.1) as compared to the overall businesses (144.3), primarily on account of lower optimism on selling prices.

On hiring, the year-on-year as well as the quarter-on-quarter outlook has improved for Q1 2014 with 39% businesses expecting to increase their employee count compared to 27% in Q1 2013 and 26% in Q4 2013. Service and manufacturing firms are more optimistic with respect to hiring compared to trading companies.

Majority (64%) of the respondents cited no business challenges impacting their operations, thus reaffirming the ease of doing business in Dubai. For the remaining, the primary challenge is competition from local and international market players while increasing rentals & leasing as well as government fees & regulations also featured in the list.

Businesses are also buoyant on investing in upgrading capacity and technology linked to their operations. A significant number (77%) intend to invest in capacity expansion in Q1 2014 compared to 72% in the previous quarter. Similarly, those planning technology upgrades have increased to 66% in Q1 2014 from 60% in the previous quarter.

DED conducts the quarterly surveys as an effective tool to measure the pulse of the business community and allow the government and the private sector to track and analyse major trends and issues that have a bearing on economic activity in Dubai.

A total of 502 companies in Dubai were covered in the Q4 2013 survey. The companies were asked to indicate if they anticipated an ‘increase,’ ‘decrease,’ or ‘no change’ in key indicators such as sales revenues, selling prices, volumes sold, profits and number of employees.

Conducted in collaboration with the global consultancy firm Dun & Bradstreet (D&B), the quarterly survey uses a rigorous sampling approach that ensures adequate representation of small, medium, and large enterprises across the manufacturing, trading, and services sectors, while giving due attention to the perceptions of the exporting firms in Dubai.