Gulf Finance Corporation, a leading provider of finance to SME and micro businesses, today announced the results of their Q3 Gulf Finance SME Sentiment Survey.
Highlights:
· Respondents slowly turning more negative as economic growth continues to soften
· 15% have seen a deterioration in payment collection
· 13% reported difficulties in their ability to raise finance
· Sentiment on growth outlook is less bullish as lower expectations on quarterly sales become more prevalent
· A larger proportion of respondents saw a decline in hiring for the first time this year
"The survey findings indicate the SME sector is experiencing a slow deceleration as the global economic malaise permeates the local economy at a faster rate than anticipated," said David Hunt, CEO of Gulf Finance. "Although the majority of SMEs still see opportunities for growth, a larger portion of SME respondents report a negative growth outlook and deterioration in their ability to raise finance and collect payments - two telling indicators of tightening liquidity. This was reinforced by a greater number of respondents also reporting a decline in orders, sales and recruitment. The uncertain summer months have been replaced by a nervous looking winter."
Lowered expectations on growth
The proportion of respondents positive on growth outlook for the coming 3 months is lower at 78% in Q3 compared to 93% in Q2. At the same time twice as many respondents, 14%, see stagnation in growth levels which are reported to remain the same (Q2: 6%), while 7% are expecting growth to be negative in the coming quarter (Q2: 0%).
Signs of tightening liquidity
As a whole, payment collection worsened in Q3 compared to the first two quarters of the year. A total of 55% of respondents state their payment collection ability remains strong (Q2: 72%), while the number of respondents revealing a deterioration in payment collections increased significantly to 15% (Q2: 2%).
On the credit side, 13% of those surveyed had experienced more difficulty in raising finance (Q2: 0%). Although 35% stated their ability to raise finance had remained unchanged (Q2: 26%), and 53%, of respondents, or one in two (Q2: 74%), did not report problems in accessing growth capital, the downward trend in access to funding is a sign of more difficult times ahead for SMEs.
"These trends are important indicators of the state of UAE SMEs and consistent with what we are seeing in the market, that is, financial institutions are tightening credit, which is clearly now beginning to affect small businesses. At Gulf Finance, we have also experienced an increase in number of customers approaching us to discuss problems they are facing with regards to payment collections and are currently working with some of them to help improve this issue," commented David Hunt.
Weaker performance in Q3
In the third quarter, the survey for the first time recorded a weakening in orders received compared to the second quarter with 7% of respondents claiming their orders decreased or significantly decreased (Q2: 0%). The number of respondents reporting an increase in orders received decreased to 71% (Q2: 80%) while the share of orders remaining flat grew to 22% (Q2: 18%).
Corresponding to this, a growing number of firms seem to have reassessed hiring plans with 29% of SMEs surveyed reporting that headcount during Q3 remained the same (Q2: 24%) and 4% reporting a reduction in number of staff during the quarter (Q2: 0%). Despite this, a total of 67% stated that they have expanded their teams (Q2: 72%).
Q4 outlook cautious
Looking ahead, overall sentiment on final quarter growth is less positive than in previous quarters with 78% of survey respondents forecasting an increase in sales (Q2: 91%). A larger number, 19%, of those surveyed expect growth to remain flat (Q2: 8%), while results reveal that 3% of SMEs participating in the survey foresee negative growth in Q4.
With regards to headcount, 70% state that they will consider an increase in number of staff (Q2: 72%), while 29% will maintain the same number of employees (Q2: 27%). A small number of respondents, 2%, are planning to downsize their workforce (Q2: 0%).
"Although growth opportunities for SMEs still preside, the less bullish and increasingly pessimistic sentiment in the market is evidence that the effects of a slowing pace of economic growth are beginning to impact SME performance. A number of factors could reverse this trend and we will be monitoring developments closely until the end of the year," said David Hunt.
-Ends-
Gulf Finance Corporation, a wholly-owned subsidiary of SHUAA Capital, is a leading business finance company that provides funding solutions to small and medium sized enterprises (SMEs) in the UAE. Gulf Finance was founded 18 years ago. It offers a broad range of funding solutions such as small business loans, commercial finance, business vehicle and equipment finance, trade finance and marine finance. Gulf Finance has office presence in Dubai, Sharjah and Abu Dhabi and serves customers across the UAE. Gulf Finance is headquartered in Dubai.
For further information please contact:
Brunswick Gulf
+971 4 446 6270
shuaa@brunswickgroup.com
© Press Release 2015
