SMEs ‘cautiously’ optimistic in 2016

JEDDAH — Despite indications suggesting that 2016 will be a challenging year for SMEs, the overall sentiment among small businesses remains cautiously optimistic with 50% of respondents saying that they are feeling slightly positive, while 25% remain neutral and 12% are negative. Only 8% stated that they have a very positive outlook and 4% were unsure, Gulf Finance Corporation, a leading provider of finance to small and micro businesses, revealed in its “Q4 2015 Gulf Finance SME Sentiment Survey”. “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,” David Hunt, CEO of Gulf Finance, noted. “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,” he added. Moreover, he said “the last quarter of 2015 witnessed a significant increase in negative sentiment sweeping the SME market. After a strong start to the year, UAE-based SMEs rapidly struggled to raise and collect money, pushing plans to recruit, launch products or open new outlets aside.” Slower growth negatively impacts confidence The fourth quarter saw a sharp fall in respondents reporting a positive outlook on growth and sales with 35% expecting that growth will remain unchanged or turn more negative (Q3: 19%) and 65% maintaining a positive outlook (Q3: 79%). This view is supported by the fact that the number of respondents reporting an increase in total orders received in the final quarter decreased to 49% (Q3 71%), while the number of respondents stating that total orders have stagnated or declined increased to 51% (Q3: 28%). Of all respondents, 62% see sales increasing in the first quarter of 2016 (Q3: 78%) while 38% anticipate sales to either remain the same or decline (21%). The trend of worsening payment collections continued in Q4 with 29% of respondents seeing a continuing deterioration (Q3: 15%) and 47% reporting their ability to collect payments as unchanged from the previous quarter (Q3: 30%). The current situation is a sharp contrast to the first half of 2015 when 69% and 72% of respondents in Q1 and Q2 respectively reported an improvement in payment collections (Q4: 24% and Q3: 55%). Similarly, companies’ ability to raise finance has also worsened with 36% of respondents reporting a decline (Q3: 13%), and 38% maintaining that their ability to access growth capital is unchanged (Q3: 35%). In combination, difficulties with regards to payment collections and tightening credit are likely to put more pressure on the financial situation of small businesses. Recruitment plans have consistently declined among survey respondents since the beginning of the year and are in Q4 lower than ever with 50% of respondents planning to either maintain or reduce their headcount in the coming three months (Q3: 32%). The remaining 50% may consider hiring strategically (Q3: 69%). This again contrasts sharply with sentiment in the first two quarters of 2015 when 84% and 72% of respondents in Q1 and Q2 respectively had plans to expand their workforce. — SG