Dubai: The United Arab Emirates economy is beginning to show early signs of stress as the Gulf war stretches beyond a month, with some layoffs in sectors such as hospitality, travel, events and food & beverage (F&B).
Companies in these sectors have started cutting jobs, reducing salaries and sending employees on unpaid leave, according to HR executives in the country. They warn that this may just be the beginning, with the impact likely to spread to other sectors in the coming weeks if the conflict persists, having begun February 28.
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A slowdown in the UAE job market could also affect remittance flows to India that typically help cushion the country’s trade deficit. The UAE accounts for about a fifth of India’s global remittances.
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“Job losses and salary reduction are already happening in some companies in the UAE since last week,” said Sarah Brooks, managing director, Fikrah HR. “It's across many companies and industries unfortunately, some are hospitality, retail, and food & beverage.”
Most of these sectors are following an action plan similar to the one adopted during the Covid-19 pandemic.
“They are providing unpaid and annual leaves, air tickets to facilitate team members travelling home. Fewer are being laid off, they are working to preserve employment knowing that business will return and the team would be needed in time,” Brooks said.
“About 60% of the impact is on the hospitality industry and the events segment, while the remaining 40% is spread across other sectors,” she said. “Salary reductions are already happening. In many companies, pay cuts range from about 20% to even 50%. The situation is getting worse by the day.”Several F&B companies are waiting to see if the situation improves by mid-April and will then contemplate further salary cuts or putting employees on unpaid leave, Heblikar said.
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Even after the war ends, it could take another quarter for business conditions to normalise.
“Right now, businesses are not thinking about achieving revenue targets or budgets,” she said. “It is more about survival.”
A five-star hotel in Dubai Marina fired 300 people two weeks ago, while a large cloud kitchen operator in the UAE sacked around 100 people last week. A well-known Russian restaurant in Downtown Dubai has reportedly laid off about 15 employees, and another major F&B player has reduced salaries by 50%, essentially telling staff to accept the cut or leave. These are only a few of the many examples indicating economic stress.
According to data from Biz2X, consumption activity in the UAE has dropped 25-30% since the war began, based on point-of-sale (PoS) transactions.
Market research firm Redseer Middle East told ET that while luxury and big-ticket discretionary retail are the hardest hit on the residential side, tourism-linked hospitality is also a casualty.
“There is no domestic offset for a $59 billion inbound tourist economy. Physical F&B is caught in the middle,” said managing director Sandeep Ganediwalla. “About 20% of residents have cut spending on dining, while tourist-driven footfall in premium restaurant clusters has also declined.”
He added that discretionary categories including electronics, furniture and apparel have declined 35-38%, indicating stress on non-essential retail.“Another major area being hit is real estate and business setup companies,” said an HR executive. “I work closely with two large corporate service providers in Dubai, each employing around 300-400 people. They have started laying off staff or sending employees on reduced pay. Their business depends heavily on new investors setting up companies in the UAE, and right now there are virtually no new investors.”Without new business, commissions have stopped and salaries have been cut by about 50% for some employees, the person said.
Companies in these sectors have started cutting jobs, reducing salaries and sending employees on unpaid leave, according to HR executives in the country. They warn that this may just be the beginning, with the impact likely to spread to other sectors in the coming weeks if the conflict persists, having begun February 28.
Also Read | UAE retailers tap alternative ways to fill food aisle
A slowdown in the UAE job market could also affect remittance flows to India that typically help cushion the country’s trade deficit. The UAE accounts for about a fifth of India’s global remittances.
(Join our ETNRI WhatsApp channel for all the latest updates)
“Job losses and salary reduction are already happening in some companies in the UAE since last week,” said Sarah Brooks, managing director, Fikrah HR. “It's across many companies and industries unfortunately, some are hospitality, retail, and food & beverage.”
Most of these sectors are following an action plan similar to the one adopted during the Covid-19 pandemic.
“They are providing unpaid and annual leaves, air tickets to facilitate team members travelling home. Fewer are being laid off, they are working to preserve employment knowing that business will return and the team would be needed in time,” Brooks said.
Businesses in Survival Mode
While hospitality, events, and travel have taken a major hit, all sectors are impacted, said Amruta Heblikar, founder, Virtual Key, an HR services firm.“About 60% of the impact is on the hospitality industry and the events segment, while the remaining 40% is spread across other sectors,” she said. “Salary reductions are already happening. In many companies, pay cuts range from about 20% to even 50%. The situation is getting worse by the day.”Several F&B companies are waiting to see if the situation improves by mid-April and will then contemplate further salary cuts or putting employees on unpaid leave, Heblikar said.
Also Read | Banks in UAE freeze FD, salary, savings a/cs after account holder’s death: A practical guide for families of deceased expats to access funds
Even after the war ends, it could take another quarter for business conditions to normalise.
“Right now, businesses are not thinking about achieving revenue targets or budgets,” she said. “It is more about survival.”
A five-star hotel in Dubai Marina fired 300 people two weeks ago, while a large cloud kitchen operator in the UAE sacked around 100 people last week. A well-known Russian restaurant in Downtown Dubai has reportedly laid off about 15 employees, and another major F&B player has reduced salaries by 50%, essentially telling staff to accept the cut or leave. These are only a few of the many examples indicating economic stress.
According to data from Biz2X, consumption activity in the UAE has dropped 25-30% since the war began, based on point-of-sale (PoS) transactions.
Tourism worst-hit
“The steepest decline has been in tourism, travel, hotels and high-end restaurants, where transactions have fallen by as much as 60%,” said Rohit Arora, CEO and co-founder, Biz2X and Biz2Credit. The company operates in the UAE through partnerships with payment processors and has access to merchant data from as many as 170,000 businesses, covering an estimated 90-95% of the market.Market research firm Redseer Middle East told ET that while luxury and big-ticket discretionary retail are the hardest hit on the residential side, tourism-linked hospitality is also a casualty.
“There is no domestic offset for a $59 billion inbound tourist economy. Physical F&B is caught in the middle,” said managing director Sandeep Ganediwalla. “About 20% of residents have cut spending on dining, while tourist-driven footfall in premium restaurant clusters has also declined.”
He added that discretionary categories including electronics, furniture and apparel have declined 35-38%, indicating stress on non-essential retail.“Another major area being hit is real estate and business setup companies,” said an HR executive. “I work closely with two large corporate service providers in Dubai, each employing around 300-400 people. They have started laying off staff or sending employees on reduced pay. Their business depends heavily on new investors setting up companies in the UAE, and right now there are virtually no new investors.”Without new business, commissions have stopped and salaries have been cut by about 50% for some employees, the person said.
