Hiring in UAE hit by low oil prices and dwindling business confidence
Author: Criselda Diala-McBride | Date: 4 May 2016
Recruitment activity continues to slow in the first quarter of 2016 amid economic uncertainty
Recruitment activity across the UAE continued to slow in the first quarter of 2016, as the number of permanent positions on offer dropped by nine per cent – highlighting the growing impact of low oil prices on business confidence, according to a recent report by Morgan McKinley.
The UAE job market has been lethargic over the past year, with the number of available jobs declining by 12 per cent compared to Q1 2015, the report suggested. Trefor Murphy, managing director for the Middle East and North Africa at Morgan McKinley, blames the persistently low oil and commodity prices for the dramatic slowdown in hiring activity in the country.
“It all stems from oil,” Murphy says. “Low oil prices have had an impact on government spending, which has now affected large industrial projects.”
He pointed out that, as the UAE government comes to terms with reduced income from the hydrocarbons sector, state-invested organisations have frozen hiring while the country goes through a period of painful adjustment.
Ravi Singh, CEO of Bluefin Consultancy, a Dubai-based management consulting firm, says the recruitment cycle in the UAE has stalled, affecting various industries such as oil and gas, hospitality, tourism, retail, manufacturing, and construction. The downbeat trend is prevalent across the GCC region, and he expects this to remain the same in the next two years.
Singh agrees that a low-oil-price environment has contributed to the lacklustre job market, but he also believes that economic uncertainty has been weighing on business confidence in the region.
“With global economic growth declining, there's a lot of insecurity across the GCC. Many businesses are uncertain about the future,” says Singh. “Recruitment has been affected and people [leaving jobs] have not been replaced because organisations don’t know what’s around the corner. I believe insecurity is what’s holding back hiring activity.”
According to the International Monetary Fund, oil-exporting countries in the MENA region – including the UAE – lost more than US$340 billion in oil revenue last year, forcing many governments to introduce economic reforms such as subsidy cuts and value-added tax.
While the UAE’s economy is more diversified than its GCC neighbours, oil and gas still accounts for around 34 per cent of its GDP and provides 64 per cent of consolidated government revenues, Moody’s reported. The ratings agency placed UAE’s Aa2 rating on review in March for a possible downgrade, as it assesses the impact of plunging oil prices on the country’s balance sheet.
Meanwhile, Murphy hopes the recruitment cycle for some industries in the UAE will stabilise towards the second and third quarter of 2016. However, a prolonged period of low oil prices is expected to put further downward pressure on the oil and gas sector.
Despite current market conditions, he still sees pockets of opportunities in the UAE job market. “There has been a noticeably huge increase in demand for consultants and consultancy firms – organisations specialising in lean process improvement or anything that makes a current process more efficient, whether that’s someone with expertise in reducing discrepancies in a retail bank or bringing new technology to increase [operational] efficiency of any organisation.”
Gareth El Mettouri, associate director at Robert Half UAE, believes that although the UAE may be feeling the pinch of falling oil prices, businesses continue to plan ahead.
“Investment continues to be made in the region and professionals looking for opportunities within real estate and development, hospitality, healthcare and education have positive prospects,” he says. “Preparations for Expo 2020 continue to be a big influence on the hiring market within the UAE as new real estate developments, such as hotels and retail outlets, are in train. This is having a knock-on effect for skilled financial planning and analysis professionals who are accurately able to support businesses with the budgeting and forecasting for these future projects.”