Companies in these sectors have started to cut jobs, reduce wages and send workers on unpaid leave, according to HR managers in the country. They warn that this may be just the beginning, with the impact likely to spread to other sectors in the coming weeks if the fighting, which began on March 28, continues.
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A slowdown in the UAE’s labor market could also affect the flow of capital to India which helps reduce the country’s trade deficit. The UAE accounts for a fifth of India’s global remittances.
“Job losses and wage cuts are already taking place at some companies in the UAE since last week,” said Sarah Brooks, managing director, Fikrah HR. “Across many companies and industries unfortunately, some of which are hospitality, retail and food and beverage.”
Most of these agencies are following the same operational plan adopted during the Covid-19 pandemic.
“They’re giving unpaid and annual leaves, plane tickets to help team members go home. Few are being cut, pieces that the company will return, and the team will be needed in time, “Brooks said.
Businesses for Survival
While hospitality, events and travel have been hit hard, all sectors are affected, said Amruta Heblikar, founder, Virtual Key, an HR services firm.
“About 60% of the impact is in the hospitality industry and events sector, while the remaining 40% is spread to other sectors,” he said. “Several F&B companies are waiting to see if the situation improves by mid-October and will consider further wage cuts or putting workers on unpaid leave, Heblikar said.
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Even after the war ends, it may take another quarter for business conditions to normalize.
“Right now, businesses don’t think about meeting revenue targets or budgets,” he said. “It’s more about survival.”
A five-star hotel in Dubai Marina laid off 300 people in the past two weeks, while a major cloud kitchen service in the UAE laid off nearly 100 people last week. A popular Russian restaurant in Downtown Dubai has reportedly laid off about 15 workers, and another major F&B player has cut wages by 50%, essentially telling workers to accept the cut or leave. These are just a few of the many examples of economic stress.
According to data from Biz2X, UAE consumption has dropped by 25-30% since the start of the war, based on point-of-sale (PoS) transactions.
Tourism hits the hardest
“The biggest decline has been in tourism, travel, hotels and luxury restaurants, where transactions have dropped by nearly 60%,” said Rohit Arora, CEO and co-founder, Biz2X and Biz2Credit. The company operates in the UAE in partnership with payment processors and has access to merchant data from approximately 170,000 businesses, covering 90-95% of the market.
Market research firm Redseer Middle East told ET that while luxury and big-ticket stores are the biggest hit on the accommodation side, tourism-related hospitality is also a risk.
“There is no local currency for the tourist economy that comes in at $59. The physical F&B is held in the middle,” said chief executive Sandeep Ganediwalla. “Approximately 20% of the population has reduced the amount they spend on eating out, while the number of tourists has decreased in the first restaurant groups.”
He added that discretionary items including electronics, furniture and clothing were down 35-38%, which reflected the pressure on non-essential sales. “I work closely with two large business service providers in Dubai, each employing around 300-400 people. They have started to reduce staff or send staff on reduced wages. Their business is very dependent on new investors setting up companies in the UAE, and now there are no new investors.”
Stop events
All events have been suspended for at least the next three to four months, which directly affect people employed in this sector.
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