According to a survey by Grant Thornton, most businesses in the UAE have opted to shift the expense of rising inflation onto the consumers in an effort to protect their margins. The survey noted that businesses have not taken any actions to cope with inflation in the long run.
The survey found that businesses reported cost increases of 18% for energy and utilities, 17% for raw materials, and 14% for wages and staff compensation. Around 16% increases were reported for equipment, bank and interest costs, and taxes.
Samer Hijazi, Abu Dhabi Office Managing Partner at Grant Thornton UAE said that the price increases people are witnessing from businesses around the world, including those in the UAE, are an extraordinary display of pricing power.
“These recent price increases have been supported by a perfect storm of strong demand and supply shortages, but this situation won’t last forever. Mid-market businesses need to take a range of different, proactive steps to deal with inflation in the longer term. They can’t simply continue to price their way out of this problem,” he added.
The survey also found that businesses in Turkey, Argentina, and India reported the highest increases in prices overall, while Sweden, China, and Japan have experienced the lowest increases. Only a few are acting beyond price increases to plan for managing inflation. The most active countries in terms of businesses taking strategic preventative measures are Nigeria, India, and Singapore.
Hijazi says, UAE falls into the lower half of the table. While 37% of the country’s businesses are changing their pricing strategy in line with cost increases and 31% are focusing on product or service differentiation, only 14% are taking action to reduce levels of debt or interest.