The UAE’s Small & Medium Enterprise (SME) sector has successfully moved from a stage of “resilience” to “prosperity “, with two in three SMEs expressing a positive view of the future business environment, following the recovery from the pandemic-related pressures.
The data was published in the SME Confidence Index report published by the National Bank of Ras Al Khaimah (RAKBANK) in collaboration with independent research company RFI Global.
The report found an overall confidence index score of 61 among UAE SMEs. The number is based on RFI Global’s analysis of macroeconomic indicators in the UAE and survey responses from over 1,000 SMEs in the country collected between November and December 2023.
“With most of the industries in the report topping the index base score of 50, it is clear that SMEs across the board are experiencing a period of robust growth, propelled by notable increases in revenue over the past two years, especially within key sectors such as Construction & Manufacturing and Public Services,” the report read.
The report reflects a strong economic forecast for the UAE, with non-oil GDP expected to grow by over 4% in 2024, and overall GDP projected to grow by 5.70% during the same period.
The construction and manufacturing sector-with a score of 62- has seen the highest revenue increase over the last two years compared to other industries. Transport-dependent SMEs, with an index score of 60, show a cautiously measured optimism due to pricing adjustments, but a clear intention to explore new operational channels.
Public services SMEs and professional Services SMEs also stand out with a confidence index score of 62. Meanwhile, consumer and retail services SMEs and trading SMEs saw a lower confidence index score of 59 among the businesses surveyed in these industries.
“Small and Medium Enterprises are the backbone of every healthy economy, and this is especially true in the UAE, where SMEs make up 94% of companies and contribute over 50% to the country’s GDP,” said Raheel Ahmed, Chief Executive Officer at RAKBANK.
The responses also highlighted recovery in factors such as hotel occupancy rates close to pre-pandemic levels, which signals a rebound in the tourism sector that is contributing to the generally positive outlook among SMEs about their future revenue prospects and the business landscape in the next 12 months.
However, the report also talks about the challenges faced by SMEs, including rising labour, operational and other business costs; the impending introduction of corporate tax; and the cost of capital and credit. To navigate these challenges, SMEs “need continued support and attention from financial institutions”, in addition to the initiatives that have been put in place by government entities, particularly the UAE, the report said.
