Family businesses in the Gulf optimistic about future growth

07 February 2023 Consultancy-me.com 4 min. read
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GCC-based family businesses have entered 2023 in a bullish mood, according to new research by Deloitte, with the majority of leaders anticipating robust growth in the coming years.

The global consulting firm surveyed leaders of over 100 prominent family groups across Qatar, Saudi Arabia, the UAE, Bahrain and Oman, to see what they expected for the years ahead.

While developed economies around the world are bracing for a difficult few years, many expect GCC family businesses expect they will buck the global trend and enjoy positive results – buoyed by the resilient economies of the Gluf, on the back of a booming oil-income and expansive government spending.

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“Family enterprises expect the thriving conditions currently seen in the Gulf economies to sustain, underpinned by a high oil price, and in tandem with this a positive force from local governments as part of their Vision 2030 agenda’s,” said Scott Whalan, Deloitte’s Family Enterprise Leader for the Middle East.

Reflecting this, most respondents pointed toward ‘robust growth’ for their respective economies in the next three years. In particular, family businesses were most buoyant in the UAE and Saudi Arabia – where efforts to wean the economy from its dependency on oil have been most widely publicised.

Bahrain residents were almost as confident in the region’s two largest economies, however. And even Oman and Qatar’s respondents were hopeful of growth that was relatively robust. This stands in stark contrast with the US economy – which they believe is heading for a ‘prolonged recession’.

With regards to the US economy, many expect that interest rates will rise dramatically in the coming 12 months – something which will act as a disincentive to borrowing, and see investment slow across the economy. A 50% chunk of the respondents said they believed the US Federal reserve interest rate would be in the range of 2% to 4% over the next three years, with 80% suggesting rates could already peak in 2023.

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This may see stock markets in the Gulf Cooperation Council (GCC) boom instead, with 45% expecting most of this growth to come in Saudi Arabia’s market – compared to 24% backing the Abu Dhabi stock exchange.

Meanwhile, GCC family business leaders expect that inflation will hover below 6% in the coming three years – dropping as low as 3.3% in 2023 in Oman, and a steady 5% in Saudi Arabia.

Such positivity may bode well for the GCC’s wider economic prospects. In the Middle East, Deloitte contends that family businesses are more influential than corporates – with a 2019 report from the firm suggesting family entities contribute approximately 60% to the region’s GDP, and employ 80% of the workforce.

To that end, Whalan added, “These results reflect highly positive sentiment towards the landscape at home, paired with appropriate caution and perhaps inevitable opportunity seizing likely to be exercised in the developed markets. The Middle East stands out as perhaps the most exciting and thriving market of the moment.”

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Challenges and priorities

Deloitte’s study echoes recent research by several other firms. A report from Big Four rival PwC previously said the GCC would buck the global recession, while another one from strategy firm Kearney suggested consumers are increasingly keen on spending.

That does not mean that the coming period will only be plain sailing, though. Family businesses face many challenges. Most prominent in the minds of company leaders are issues relating to management. A 45% portion said if they could solve ‘one problem in an instant’, they would improve corporate structure and talent; strategy; work culture; governance; or information flow.

Nearly 3 out of 10 had concerns about funding – despite their apparently bullish outlook for the coming years – wanting to fix investment; top line; bottom line; or cashflow issues as quickly as possible.