One-third of middle-market businesses in Saudi Arabia anticipate growth of over 10 percent this year and six in 10 are targeting growth of between 6 and 10 percent, a 24-percentage point jump from 2017, according to new statistics from EY.
In its annual EY Growth Barometer, EY found that businesses in Saudi Arabia are generally more optimistic about revenues and business opportunities than they were last year.
According to the report, regulation has emerged as an important driver of innovation and revenue growth, with 35 percent of Saudi respondents saying that they regard it as the most important stimulator of innovation, compared to 28 percent the previous year.
Despite the general confidence, many respondents expressed concern about cash flow shortages, citing insufficient cash flow as the most significant challenge to growth this year. Just over a third (34 percent) of Saudi companies said they rely on bank finance for funding, while 73 percent said they are considering an IPO.
"Cash flow is one of the highest risks for companies on a growth journey,” said Abdulrahman Moulay Albizioui, Saudi Arabia transaction advisory services leader at EY. “With growth comes the need for working capital, and in line with fast-growth companies worldwide the gap between long-term financing and short-term needs is a constant challenge.”
Albizioui added that “growth strategies such as technology investment, entry into new sectors and sub-sectors, and new markets all put a strain on working capital.”
The statistics also show a shift in attitudes towards technology. With regards to robotic automation and AI, for example, 82 percent of respondents said that they will have adopted the technology by 2020, with 95 percent of respondents saying they intend to do so within the next five years.
“While Saudi Arabian companies are at different stages of AI adoption, executives now no longer doubt its critical role in the future and have a new urgency to embrace AI and the business transformation that comes with its implementation,” Albizioui noted.
Additionally, many Saudi companies expressed an interested in expanding beyond the kingdom, with 29 percent of respondents saying that overseas expansion is a leading growth priority.
Encouraged by confidence in revenue growth targets, many firms also reported hiring, with 58 percent saying they were looking to recruit more full-time staff, and 62 percent saying they are looking to further diversify the workforce in their companies.
“Saudi leaders have put diversity at the top of their recruitment agendas and this emphasis is likely to be a result of the National Transformation Programme 2020 and Saudi Vision 2030,” Albizioui added. “Furthermore, the expansion into overseas markets, building external alliances and investing in technologies to meet high growth targets will continue to drive GDP growth of the country for years to come.”