70% of businesses in Dubai may not survive Covid-19 lockdown; Stirling advises business owners to get out before it is too late
If strict lockdown measures continue in Dubai, according to a new survey conducted by the Dubai Chamber of Commerce, the city will be emptied of up to 70% of its businesses. Roughly half the companies surveyed said they would have to close if there is just one more month of lockdown.
“The results of the survey are devastating, but not at all surprising,” Radha Stirling, CEO of Detained in Dubai, says, “Early on, we advised business owners in the UAE that the best action to take when forced closures became inevitable was to suspend their businesses and exit the country. It is a painful move to make, but it is the safest. Every economy in the world has been neutralised by shutdowns and a place like Dubai will be predictably harder hit than most. The tap of tourism has been closed, many people within the country are not working or earning salaries; supply chains have been frozen; even if lockdown measures are lifted today in Dubai, realistic recovery may take far longer than most companies can sustain.”
Stirling warns that the economic impact on the UAE of the global response to the Coronavirus pandemic is likely to be longlasting. Officials predict that the country of predominantly expats, could see a 10% reduction in total population, as many foreigners are opting to return to their home countries.
“Why did we advise business owners to leave? Because in the UAE, insolvency, default, bounced cheques, and any failure to fulfil financial deals or business contracts will land you in prison. So, when you are talking about 70% of companies closing within 6 months, that translates to a major surge in criminal cases against business owners who are likely to be accused of fraud, embezzlement, breach of trust, or any assortment of other wrongful allegations stemming from the damage done to their businesses due to the lockdowns. The malls will be empty, but the jails will be full.
While the UAE government has introduced stimulus packages to increase liquidity for the banks, Stirling cautions that this could become a lethal trap for business owners whose optimism or desperation cause them to take on excessive debts that the ravaged economy will never convert into profits. “It has always been tempting to take lines of credit in the UAE; they make it very easy. When your company is struggling, and you are hopeful for a return to normalcy, it is understandably even more tempting to take out further loans. But business owners have to be pragmatic; the market is not there, suppliers are not there, consumers are not there, tourists are not there; digging deeper into debt is a recipe for disaster in the UAE.
“History has shown us that UAE banks respond to economic crises quite ruthlessly; loans are recalled, credit closed, properties seized, late payments or bounced cheques are prosecuted vigorously, and even escalated to Interpol. If a business owner can realistically foresee that their company will not survive lockdown, or is unlikely to recover after lockdown, they should exit the UAE as soon as possible. Any outstanding issues can be better sorted out from abroad rather than from a prison cell.”