UAE Economy Shows Early Signs of Strain Amid Gulf Conflict
A month into the Gulf conflict, early economic strain is surfacing in the United Arab Emirates, with companies across key sectors beginning to implement cost-cutting measures. According to a recent report, firms in hospitality, travel, events, and food & beverage are resorting to layoffs, pay reductions, and unpaid leave to navigate the challenging environment.
Job Losses and Salary Cuts Across Industries
People tracking hiring trends indicate that adjustments have already started at the firm level and could broaden if hostilities persist. The conflict, which began on February 28, has disrupted travel flows and business activity across the region, leading to immediate impacts on employment.
Sarah Brooks, managing director of Fikrah HR, confirmed, "Job losses and salary reduction are already happening in some companies in the UAE since last week. It's across many companies and industries unfortunately, including hospitality, retail, and food & beverage."
For India, this shift carries a significant second-order impact: weaker employment conditions in the UAE could dent remittance inflows, which are a key support for India's current account. The Gulf nation contributes roughly a fifth of India's global remittances, making this development a concern for economic stability.
Companies Adopt Covid-19 Playbooks
In response to the crisis, companies appear to be reverting to strategies used during the Covid-19 pandemic. They are focusing on cutting variable costs while attempting to retain staff. Brooks explained, "They are providing unpaid and annual leaves, air tickets to facilitate team members travelling home. Fewer are being laid off, as they are working to preserve employment, knowing that business will return and the team would be needed in time."
Pressure Concentrated in Hospitality and Events
The initial shock has been most visible in customer-facing sectors. Amruta Heblikar, founder of Virtual Key, noted, "About 60% of the impact is on the hospitality industry and the events segment, while the remaining 40% is spread across other sectors."
She added that salary reductions are already occurring, with pay cuts ranging from about 20% to even 50% in many companies. "The situation is getting worse by the day," Heblikar emphasized. Several food and beverage operators are holding decisions on deeper cuts until mid-April, when they expect clearer visibility on demand.
Even with a potential cessation of hostilities, recovery may lag. Heblikar stated, "Right now, businesses are not thinking about achieving revenue targets or budgets. It is more about survival." She predicted that a return to normalcy could take another quarter after the war ends.
Company-Level Actions Highlight Growing Stress
Specific examples point to stress building beneath the surface:
- A five-star hotel in Dubai Marina recently let go of 300 employees.
- A cloud kitchen operator cut around 100 roles.
- A restaurant in Downtown Dubai reportedly reduced headcount.
- Another F&B chain halved salaries, asking staff to accept revised pay or exit.
Spending Slows, Tourism Takes the Biggest Hit
Transaction data suggests a broad-based cooling in demand. Biz2X estimates that overall consumption has fallen 25–30% since the conflict began.
Rohit Arora, CEO and co-founder of Biz2X and Biz2Credit, said, "The steepest decline has been in tourism, travel, hotels and high-end restaurants, where transactions have fallen by as much as 60%."
Redseer Middle East reported that discretionary consumption has also weakened. Managing director Sandeep Ganediwalla explained, "There is no domestic offset for a $59 billion inbound tourist economy. Physical F&B is caught in the middle. About 20% of residents have cut spending on dining, while tourist-driven footfall in premium restaurant clusters has also declined."
He added that categories such as electronics, furniture, and apparel have seen a 35–38% drop, signalling stress in non-essential retail sectors.
Investment-Linked Sectors Begin to Feel the Pinch
The slowdown is spilling into real estate and business services that depend on new company formation. An HR executive revealed, "Another major area being hit is real estate and business setup companies. I work closely with two large corporate service providers in Dubai, each employing around 300–400 people. They have started laying off staff or sending employees on reduced pay."
With fresh investor inflows drying up, commissions have stalled, and in some cases, salaries have been cut by about 50%, the person noted.
Industry executives said events have largely been put on hold for the next three to four months, removing a key source of demand for hospitality and ancillary services.
Shift from Growth to Cash Preservation
As uncertainty persists, firms across sectors are shifting from growth plans to cash preservation. Labour adjustments are emerging as the first visible sign of a broader economic slowdown in the UAE, highlighting the far-reaching impacts of the Gulf conflict on the regional economy.
