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First with Financial Comment from Arabia

More job losses inevitable in the UAE in 2010

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Over the 12-month period to August some 16 per cent of workers in the UAE lost their jobs, according to data published by online recruitment firm gulftalent.com.

But with the Dubai debt crisis marking a fresh stage in the implosion of the local economy since September 2008 and the global financial crisis, local real estate crash and oil price slump, there can be no doubt that more redundancies are to follow as companies downsize to a lower level of business in the region.

Dubai job losses biggest

According to gulftalent.com the biggest loss of jobs came in Dubai where the real estate and construction boom was most established. In the Gulf it was Oman which fired the least staff in the period.

Pay packets have also been hit by the slowdown, with 60 per cent of the 24,000 respondents to a survey not getting a pay rise this year. The survey showed that 20 per cent of companies were looking to make further job cuts in the final quarter of the year.

But when the survey was made – before the Dubai debt crisis emerged – some 51 per cent of companies were planning to expand staff next year because lay-offs had been overdone. Whether that reversal of the downturn actually happens now looks in doubt.

Greater caution on the part of local management can now be anticipated and the impact of the debt crisis on the general economy remains uncertain, although clearly it is not going to be positive.

Bad debts

What normally happens in debt crisis situations is that the contagion spreads. First, credit becomes tighter and more expensive for all companies. Secondly, more bad debts will appear from indebted concerns. Third, the general volume of local business activity will drop.

Business confidence had been showing signs of improvement in recent surveys but this will have taken a blow from the Dubai debt crisis. This is bound to lead to a reassessment of budgets for 2010.

If the Dubai debt crisis is acting as a wake-up call to over-optimistic recovery assumptions among local management teams then it is at least serving some purpose. Bravely soldiering on with business as usual could be suicidal if it means that the complete transformation of local economic prospects is not understood.

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Written by Peter Cooper

December 9, 2009 at 1:59 pm

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