Global profit outlook weakens while GCC remains optimistic
Grant Thornton report highlights changes in the GCC’s labour markets
There is a general skills shortage as the region embarks on ambitious programmes toward significantly more diversified economies. Over the long-term, though, the economies will be transformed for the better by innovative use of labour-saving technology.
Grant Thornton’s quarterly International Business Report (IBR), which surveys 2,500 businesses in 36 economies, notes that large-scale projects such as Expo 2020 in Dubai are driving demand for new hires, as is the introduction of value added tax (VAT) in 2018 in KSA and the UAE. Voluntary employee turnover, however, has increased to 39% of organisations over the last three years1, and this coupled with renewed growth in local job markets has made for challenging times.
Peter Bodin, Global CEO-Elect at Grant Thornton, commented:
“Profits are under pressure in the GCC, as they are in the rest of the world. Wage bills are firmly on the rise as businesses try to tackle the skilled worker shortage. It’s an issue that is becoming acute. In all the years surveying businesses, this is the highest level of concern we have seen globally about the potentially negative impact of a lack of skilled staff on growth prospects.”
“Companies are having to compete for skills - both to retain those they have and recruit those they need. As a result, we are seeing businesses planning to boost pay. This reflects what we are hearing from companies around the world, and firms paying staff more is almost certainly hitting the outlook on profits”.
Peter Bodin is visiting the UAE for the first time, in order to experience the launch of Grant Thornton UAE’s‘Mission2021’ strategy. This strategy will deliver new and innovative solutions whilst penetrating innovation and technology, in recognition of the new economic landscape.
The IBR highlights the scale and complexity of the changes that are taking place in the GCC’s labour markets.
- The Dubai Government has already made estimated savings US$1.17bn through shared government smart services since 2003 2.
- UAE based Mashreq Bank recently announced it could become branchless as all services would be available online and AI could replace customer service representatives with chatbots 3.
- In Dubai, over 600 typing centres used in the processing of visas are currently being phased out and instead replaced with just 50 Amer Business Centres housing smart systems to process visa and residency transactions all under one roof.
- Automation could replace close to half of all work activities in the GCC: 41% in Kuwait, 46% in Bahrain and Saudi Arabia, and 47% in the UAE .
Observed Hisham Farouk, CEO of Grant Thornton for the Middle East: “Tasks are being replaced by technology, but these are the time-consuming, repetitive, and mundane ones. Skillsets will need to adapt to the jobs of the future: by 2020, 21% of core skills in the countries of the GCC will be different compared to skills that were needed in 2015” .
“The IBR therefore describes the long-term opportunity for the region as much as the short-term challenge. Eventually, new technology and training will, resolve the skills shortage, boost productivity and raise the potential growth rates of the GCC countries.