Businesses across Dubai remain upbeat on growth and revenues with expectations riding high, especially in the manufacturing sector, as reflected in the quarterly business survey conducted by the Department of Economic Development (DED) during the first three months of 2012.
According to the survey the composite Business Confidence Index (BCI) for Dubai stood at 120.5 points in Q1 2012, indicating an optimistic outlook for the next quarter. BCI crossing 100 points is seen as indicative of a positive sentiment within the business community.
A majority of businesses in Dubai foresee sales increasing, or remaining steady, and plan to retain their employee count through to the second quarter. The survey also reveals an even brighter outlook among export-related businesses, rising confidence among SMEs and a stronger investment focus on upgrading technology.
His Excellency Sami Al Qamzi, Director-General of DED, commented: “For a businessman or investor planning his next step, it is important to know what his peers think. Particularly in a competitive business hub like Dubai, where intelligent and informed decision-making can make a big difference, it is critical to understand that thought process and its key drivers.”
Al Qamzi added: “The Business Confidence Index of DED provides a reliable source of information on the trends and expectations ruling business and investment in Dubai. All categories and sectors of business are included in the quarterly surveys to make the index a comprehensive and authentic reference.”
Continuing the trends of the last few quarters, sales are forecast to increase in the next quarter too, driven by sales volumes. However, a few companies intend to raise their prices following the rise in the cost of raw materials across global markets.
Higher sales revenues are predicted by 50% of the companies, while 35% see no change compared to Q1 2012. Profit expectations are also positive, with 44% of the respondents expecting an increase in the next quarter.
The survey showed manufacturing as the most optimistic sector, with positive outlook extending across all key parameters (sales volume, selling prices, profits and employees). The service sector is close behind, while trading has a comparatively lower overall outlook. In addition, exporters in Dubai were seen to have a more positive outlook on sales performance, new purchases and profits, compared to non-exporters.
Even though expectations are similar on sales volumes among SMEs and their larger counterparts, large businesses are more optimistic about profits for the coming quarter. Large businesses are also relatively more positive on the employment outlook.
On an overall basis, the outlook for employment continues to be stable, with 74% of businesses expecting no change in their head count in Q2 2012. However, manufacturing and service firms plan to increase their workforce in the coming quarter.
Positive expectations on sales volumes have also ensured that 45% of businesses will step up their purchases, mainly to replenish stocks for the upcoming Dubai Summer Surprises (DSS) and Ramadan season. Among manufacturing firms, 55% plan to increase their purchase orders in the next quarter, followed by trading (48%) and service (41%) firms.
Within manufacturing, sales expectations are high for the metal fabrication, plastics and furniture segment. Meanwhile, in the services sector, such expectations are driven chiefly by professional services, transportation, information technology and telecommunications. Transportation and logistics companies seem to be buoyed by expectations of improved cargo movements during the Ramadan-DSS period.
The hospitality sector has factored in a slowdown during peak summer but the retail sector expects to stay on course through promotions and discounts. The construction sector has relatively rising hopes for the next quarter, with 48% companies expecting an increase in orders from the anticipated resumption of stalled projects.
Compared to the last quarter, the current survey shows a higher number of businesses planning to invest in technology upgrade. Key challenges cited by respondents include government fees and charges, insufficient demand, uncertainty on business regulations and high domestic or international competition, in that order.
The DED conducts the quarterly surveys to measure the perceptions of the business community and capture the business outlook for the future. The survey serves as a tool for measuring the pulse of the business community and allowing the government and the private sector to track and analyse major trends and issues that have a bearing on business in Dubai.
A total of 500 companies in Dubai, including SMEs, were covered in the quarterly survey conducted between January and late March this year. 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 adopts a scientific sampling approach that ensures adequate representation of SMEs across the manufacturing, trading, and services sectors, while giving due attention to the perceptions of the exporting firms in Dubai.
Before joining SME Advisor as an Assistant Editor in 2010 I obtained a Bachelors Civil Law Degree (Hons) from the National University of Ireland, Galway, Ireland, in 2005. I worked as a trainee lawyer in Dublin, Ireland, specialising in defence litigation and criminal law before obtaining a Masters in International Journalism from the University of Cardiff in 2009. At present I am the Editor of SME Advisor Middle East, which is a publication within the CPI Business Group. You can follow me on twitter: @mikey_byrne or @SMEadvisorME. Also, you can join me on Linkedin (Mike Byrne) or at (SME Advisor).