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UAE-based SMEs’ confidence has rebounded since the covid-19 pandemic, with businesses expressing optimism on future revenues and the business environment in the country, according to the RAKBank SME Confidence Index (pdf). Across the six industries covered in the index — construction and manufacturing, transport, trading, public services, professional services, and consumer and retail services — businesses reported a confidence score of more than 50.0. A score below 50.0 signals a decrease in confidence, while a score above that threshold signals an increase.
A sector-by-sector overview: SMEs in construction and manufacturing, public services, and professional services lead the pack in their confidence ratings, with the three sectors reporting a confidence score of 62. Transport SMEs follow closely behind with a confidence score of 60, while trading and consumer and retail services businesses turning in the lowest score (59) due to revenue declines and concerns over the corporate tax.
What’s driving the optimism: The renewed confidence is buoyed by an average 45% increase in SMEs’ revenues over the past two years, with the most notable rebound in revenues reported in the construction, manufacturing, and public services sectors. SMEs also pointed to a stable macroeconomic outlook supported by rebounded hotel occupancy rates compared to pre-covid levels, alongside growth in non-oil GDP.
A healthy business outlook: The report highlights a surge in consumer demand, with SMEs preparing to launch new products/services and expand operations through various channels.
But several factors are stoking worries among SMEs: Surveyed businesses pointed to the rising cost of doing business — particularly with higher labor costs and raw material prices — along with the introduction of the corporate tax in the UAE as key causes for concern moving forward. Furthermore, while the construction and manufacturing sectors experienced revenue growth, consumer services saw declines, leading to lower confidence levels compared to the overall market. Businesses also noted that higher oil prices over the past two years has been a source of financial pressure.
