Coronavirus: Dubai businesses may never return to ‘normal’ as closures extended

Dubai's Burj al-Arab. (AFP)

Businesses in Dubai are preparing for the worst despite signs that the UAE may be easing the lockdown conditions that have shut whole sectors of the economy in an attempt to slow the spread of coronavirus – with some business owners warning that conditions may never return to “normal” again.

With Dubai’s 24-hour lockdown set to expire in two days and Emirates restarting flights to select destinations, there are signs that the UAE may be beginning to ease the restrictions on movement and social gathering it has imposed since March.

However, with coronavirus cases in the country continuing to rise daily, a circular issued by Dubai’s Department of Tourism and Commerce Marketing (DTCM) on Wednesday night confirmed that restaurants, bars, and hotel facilities would continue to be shut until further notice.

Read more: Coronavirus: Dubai extends shutdown of hotels, restaurants until further notice

The announcement will come as no surprise to business leaders in the UAE. According to a survey of financial leaders conducted by PwC (PricewaterhouseCoopers), only 15 percent of 52 Chief Financial Officers (CFOs) in the UAE expect “business as usual” to return within a month – with 27 percent saying they think it will take between 6-12 months for normality to return.

Business leaders voiced similar concerns to Al Arabiya English – with some suggesting their sectors had changed forever.

“I don’t think reopening the business as ‘normal’ or ‘how it used to be’ is going to happen,” said Dr. Siama Qadar, the CEO of Dubai-based women’s fashion company Hybella.

“It is impossible to state, as we do not know and I can only guess. However, it will be a longtime before the previous ‘normal’ will return,” added Paul Grinnall, CEO of a management consultancy in the UAE and COO of Saudi-based Riyadh Exhibitions Company Ltd.

An empty beach on the Palm Jumeirah overlooking Dubai Marina. (Reuters)

An empty beach on the Palm Jumeirah overlooking Dubai Marina. (Reuters)

Read more: Coronavirus: With 15,000 cases in the Gulf, here is how GCC states are coping

Businesses feel the hit

Business leaders from a range of sectors all said they had taken an economic hit from the coronavirus and the resulting slowdown of economic activity.

The coronavirus pandemic has damaged economies across the world as governments shut down the economy and limit international travel to prevent human contact. Experts have predicted that global GDP could drop an unprecedented 30 percent, while the IMF has projected that the Middle East and North Africa (MENA) economy will contract by 3.3 percent in 2020 – the biggest slump in four decades causing higher unemployment and more debt.

In the UAE, 77 percent of CFOs surveyed by PwC said that coronavirus had “the potential for significant impact to our business operations and it is causing us great concern.”

One area which has been hard hit is hospitality. While restaurants are still able to deliver in Dubai, the emirate has banned restaurants and bars from opening to the public until further notice.

“Given the unprecedented disruption to the hospitality industry, several of our merchants have, unfortunately, had to close temporarily,” said Mike Rich, Marketing Director at the Entertainer, an app which provides deals for products including restaurants and leisure attractions.

The shutdown of hospitality venues has had a knock-on effect on other sectors too.

Hybella CEO Dr. Qadar said both the online and offline sections of her glamour clothing e-commerce company had been “heavily affected due to the suspension of the hospitality and events sector which has put all out potential fashion show dates on hold until it’s safe and the regulations allow it.”

Likewise, Grinnall confirmed that both companies he worked for “have witnessed a total stoppage of any input or output” as of March 2020.

Read more:

Coronavirus ‘Great Lockdown’ likely to cause worst recession in a century: IMF

GCC economies to record negative real GDP growth in 2020: IMF

Coronavirus economic crisis will be ‘worse than 2008’ as jobs dry up: Expert

Sheikh Zayed Road, one of the main roads in Dubai, empty under lockdown. (Reuters)

Sheikh Zayed Road, one of the main roads in Dubai, empty under lockdown. (Reuters)

Adapting for the long-term

Although businesses have taken an economic hit, business leaders said they were adapting their plans to mitigate the impact.

With many businesses essentially shut for an indefinite period, cash flow has become a major problem for many – with 92 percent of UAE CFOs surveyed by PwC saying they are looking at cost reduction strategies.

Government help may become increasingly necessary if the shutdown is prolonged further.

“Compared with other territories, the region’s CFOs are more likely to avail of government stimulus packages available in their country, this is especially true for Gulf states,” said Stephen Anderson, Middle East Markets and Strategy Leader at PwC.

“In the UAE, it seems that almost a quarter of CFOs are still assessing the level of relief available and how this support can be accessed,” he added.

On Sunday, the UAE said it was cutting fees for 94 of its services to reduce the cost of business and support the economy, in measures which the Ministry of Economy estimated have a value of 113 million dirhams ($31 million).

A worldwide problem for businesses and governments has also been disruption to supply chains, as countries impose restrictions on international travel and imports, while domestic supply chains are hit by temporary closures and restrictions on movement.

For example, Dr. Qadar said that Hybella’s supply chain has been affected as international fashion designers came under lockdown restrictions in different countries.

The ice rink at Dubai's mall seen empty under lockdown conditions. (Reuters)

The ice rink at Dubai's mall seen empty under lockdown conditions. (Reuters)

Read more: Coronavirus: Dubai protects e-commerce supply chain like Amazon, Noon from lockdown

However, businesses seem to be adapting to the new circumstances by finding new supply chains – and new opportunities.

In the UAE, 52 percent of CFOs surveyed by PwC said they were considering changing their supply chain.

For Dr. Qadar, the restrictions provided an opportunity for Hybella to pivot toward clothes which can be worn at home and appear on social media as people remain under lockdown.

Likewise, the Entertainer has adapted its business model in response to the coronavirus lockdown, offering new deals for customers and waiving all commissions for deliveries which are still operating. The organization has also mapped out a COVID-19 preparedness plan which includes “server disaster recovery and load balancing, daily leadership status, and assessment updates,” confirmed Rich.

But despite these new opportunities, none of the businesses spoken to were certain when they would reopen or return to normal.

“At the moment, it is hard to say, and we are taking it one day at a time,” added Rich.

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Last Update: Wednesday, 20 May 2020 KSA 10:06 - GMT 07:06
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