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SME confidence hits new low in UAE

DUBAI, February 3, 2016

UAE-based small and medium enterprises struggled to raise and collect money during the last quarter, pushing plans to recruit, launch products or open new outlets aside, according to a recent survey.
 
The Q4 2015 Gulf Finance SME Sentiment Survey, published by leading provider of finance to small and micro businesses Gulf Finance Corporation, highlighted that bearish sentiment permeated as sales and total orders received hit lowest point of the year in terms of positive outlook.
 
About 29 per cent of respondents claimed a further deterioration in payment collection over the last three months, it said.
 
More than half of Q4 respondents (74 per cent) now reported difficulties in their ability to raise finance.
 
The SMEs expressed cautious optimism ahead of this year with 50 per cent of respondents maintaining slightly positive outlook, 25 per cent are neutral and 12 per cent are negative.
 
David Hund, chief executive officer, Gulf Finance, said: “The last quarter of 2015 witnessed a significant increase in negative sentiment sweeping the SME market. 
 
“As we’ve entered 2016, it is clear that the UAE’s SME market will continue to face similar challenges as seen in the second half of 2015. With a low oil price, slowing economic activity and lower levels of liquidity, SMEs are likely to continue to feel the impact on their business activities. 
 
"Our Sentiment Survey notes a cautious optimism among small business owners which we hope will grow stronger during the course of the year.”
 
Meanwhile, the fourth quarter saw a sharp fall in respondents reporting a positive outlook on growth and sales with 35 per cent expecting that growth will remain unchanged or turn more negative and 65 per cent maintaining a positive outlook. 
 
The view has been supported by the fact that the number of respondents reporting an increase in total orders received in the final quarter decreased to 49 per cent, while the number of respondents stating that total orders have stagnated or declined increased to 51 per cent. 
 
Of all respondents, about 62 per cent saw sales increasing in the first quarter of 2016, while 38 per cent anticipated sales to either remain the same or decline.
 
The trend of worsening payment collections continued in Q4 with 29 per cent of respondents seeing a continuing deterioration and 47 per cent reporting their ability to collect payments as unchanged from the previous quarter.
 
The current situation is a sharp contrast to the first half of last year, when 69 per cent and 72 per cent of respondents in Q1 and Q2 respectively reported an improvement in payment collections.
 
Similarly, companies’ ability to raise finance has also worsened with 36 per cent of respondents reporting a decline, and 38 per cent maintaining that their ability to access growth capital is unchanged. 
 
In combination, difficulties with regards to payment collections and tightening credit are likely to put more pressure on the financial situation of small businesses.
 
Despite indications suggesting that 2016 will be a challenging year for SMEs, the overall sentiment among small businesses remains cautiously optimistic with 50 per cent of respondents saying that they are feeling slightly positive, while 25 per cent remain neutral and 12 per cent are negative, said the report.
 
Only eight per cent stated that they have a very positive outlook and four per cent were unsure, it said.
 
“The fundamentals of the UAE market remain strong and there is opportunity for growth, despite the current prevailing negative sentiment among business owners,” said Hunt. 
 
"Going forward it will become increasingly important for SME’s to be flexible and adapt to the changing market environment, and to maintain an open dialogue with financiers,” he added. - TradeArabia News Service



Tags: Gulf | SME | finance | confidence | low |

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