SME jobs hold steady as optimism returns

According to the results of the Q2 2016 SME Sentiment Survey by Shuaa Capital’s SME financing subsidiary ‘Gulf Finance’, Respondents in the second quarter have grown more optimistic about the outlook in the third quarter 2016.

Higher expectations on growth

Respondents in the second quarter have grown more optimistic about the outlook in the third quarter 2016. Factors such as macro risks and economic weakness are lower than in our previous survey and locally, banks restarting to lend, are some of the principal reasons for the cautiously optimistic growth outlook.

A total of 85 per cent of respondents had an optimistic outlook for the third quarter as opposed to 74 per cent in the previous quarter survey. One in 10 (10 per cent) of those surveyed remained unchanged (Q1 2016: 19 per cent) and three per cent are expecting growth to be negative (Q1 2016: 4 per cent).

Noticeable progression in sales orders

A higher proportion of respondents reported orders received in the second quarter 2016 were higher, 77 per cent versus the 62 per cent reported in the first quarter, and slightly down on second quarter 2015’s 79 per cent. This can be perceived as a sign that the SME market is starting to recover from lows seen at the end of 2015 and early 2016. 16 per cent saw their sales order unchanged.

Collections improve

Just over two in three respondents (70 per cent) had commented on their ability to collect payments during the quarter, stating it had improved on quarter-by-quarter basis (48 per cent). The result edges it closer to the second quarter 2015, which reached a high of 72 per cent.

Fundraising improvement

In tandem with the higher expectation of growth, 80 per cent of respondents indicated a strong increase in their company’s ability to raise funds in the second quarter, compared to less than half (48 per cent) in the first quarter 2016. This is the highest recorded sentiment since the start of the survey. The first quarter 2015 is second, with a high of 78 per cent. There are numerous factors behind this rise, including local banks re-starting their lending after a challenging first quarter.

Stable headcount

Despite a cautiously optimistic outlook, only 14 per cent of respondents added to their headcount in the second quarter and only 18 per cent have plans to add in the third quarter. These figures are near record lows since data collection started and respondents are uniformly negative on recruitment. Only four and two percent are reported to have plans to expand geographically or open up new outlets in the next quarter.

Moreover, 84 per cent reported no change to their headcounts compared to 58 per cent in the first quarter 2016. Similar numbers of respondents, 80 per cent, are forecasting their headcount to continue unchanged in the third quarter.

Commenting on the survey findings David Hunt, CEO of Gulf Finance said; “Despite the cautiously optimistic outlook suggested by our second quarter SME Sentiment Survey and noticeable increase in lending by local banks, we still feel there is a large amount of stress in the system. Despite the market normalising after a weak first quarter, it remains challenging. Recruitment is falling short, dampening enthusiasm for business expansion. Growth expectation will remain modest until the year end unless companies unlock their hiring freeze.”