A survey from Grant Thornton indicates that most UAE businesses have failed to develop a long-term strategy to fight inflation. Further, mid-size companies have opted to pass on the increased costs to consumers.
The report states that there is a substantial increase in various costs to businesses, including an 18% hike in energy and utility costs, raw materials being costlier by 17%, while wages and staff compensation have gone up by 14%. As a result, 87% of UAE businesses have raised the prices to be at par or above the costs.
“These recent price increases have been supported by a perfect storm of strong demand and supply shortages, but this situation won’t last forever. Mid-market businesses need to take a range of proactive steps to deal with inflation in the longer term. They can’t simply continue to price their way out of this problem,” says Samer Hijazi, Abu Dhabi office managing partner at Grant Thornton UAE.
This research was conducted with over 5,000 mid-sized companies across 28 countries to understand the impact of price increases and steps to mitigate the associated risks.
It was found that countries like Turkey, Argentina, and India are among the places that have the maximum price hike, while Sweden, China, and Japan are among the ones that have experienced the lowest increase in prices. The UAE has been listed in the lower half of this table, which hints that though prices are increasing, the rate isn’t as high as some global economies.
Interestingly, business owners in Nigeria, India, and Singapore reportedly took proactive measures to control inflation. Only 14% of businesses in the UAE were found to be doing so, and 37% of respondents changed their pricing strategy with high-cost prices.
“The first step for any UAE-based organization, whether trading locally or internationally, must be to identify and mitigate the risks of inflation to the business. Once a plan is in place, businesses need to take action to limit external cost increases,” Hijazi added.
Grant Thornton suggested that UAE-based businesses could look into locking in prices, bulk buying, renegotiating terms with suppliers, or changing suppliers as an effective way to deal with inflation.
Most Innovative Companies comes to the Middle East this October! Click here to know more.
Loading the player...
Dubai Tourism CEO Issam Kazim on the future of travel | Trailer