Skip to content Skip to Search
Skip navigation

Red Sea disruptions hit UAE business activity

UAE Red Sea Houthi helicopter Alamy
A Houthi helicopter approaching the cargo ship Galaxy Leader in November in the Red Sea off the coast of Yemen to land armed hijackers
  • PMI down from 57.1 to 56.9
  • Delivery times hit by Houthi attacks
  • Non-oil business rising

Backlogs of work in the UAE are at their highest levels in 15 years because of supply chain disruptions caused by the Red Sea shipping crisis.

As a result growth in the country’s non-oil business sector eased slightly in March, the seasonally adjusted S&P Global UAE purchasing managers’ index shows.

The latest PMI dropped marginally from 57.1 in February to 56.9 last month, although it remained well above the 50 mark, which separates growth from contraction.

David Owen, a senior economist at S&P Global Market Intelligence, said capacity pressures have shot up since the beginning of the year, with delivery times for UAE companies hit by events in the Red Sea. However, he said, he did not foresee any major issues at this stage.

“While the surge in backlogs is concerning as an indicator of business health, the pent-up demand should support activity growth for even longer once these issues are resolved,” he said.

The Red Sea accounts for 12 percent of trade worldwide, and 30 percent of container traffic. 

Since Houthi rebels began attacking commercial ships in the Red Sea in November, in what they claim is a show of support for Palestinians in the Israel-Hamas war, many vessels have been re-routing around Africa. 

This adds approximately 10 to 15 days to their journey times and significant extra costs.

Filipe Gouveia, an analyst at the shipping trade organisation BIMCO, said the number of ships passing through the Suez Canal was down 51 percent in the first three weeks of March compared to the same period last year, which translated to a 63 percent fall in gross tonnage year on year.

“Unless safety in the area improves significantly, ships cannot return to their normal routes,” he said.

“As shipping is responsible for transporting around 80 percent of world trade, delays and higher costs are expected to continue.”

Despite the disruptions non-oil businesses in the UAE experienced a considerable rise in output, with almost a third of firms reporting growth over the previous month. This was driven by new orders, a healthy project pipeline and promotional activity.

While costs were up, according to the index, prices fell at the sharpest rate for 3.5 years, which firms linked to growing competition and the need to retain customers, S&P Global said.

Overall optimism on the future was at its strongest level in four years.

“Strong demand, high profits and marketing plans were often attached to positive predictions,” the index reported.

Latest articles

Over 400 global food brands are taking part in the SaudiFood Manufacturing show in Riyadh this month

Saudi Arabia’s food factory count rises to 1,300

The total number of food factories operated by the Saudi Authority for Industrial Cities and Technology Zones (Modon) has reached 1,300, across 36 cities. The increase signifies the growing capacity of the domestic food industry and its localisation efforts, the state-run Saudi Press Agency reported. Food industry companies have recorded a growth rate of more […]

Garden, Nature, Outdoors

UAE commits $50m to support critical projects

The UAE has committed $50 million to the second phase of the Lives and Livelihoods Fund 2.0 (LLF 2.0), a multi-donor development initiative targeting sustainable economic development in the Islamic Development Bank’s (ISDB) 57 member countries. The funding will be deployed by LLF 2.0 to support critical projects in health and infectious diseases, agriculture, and social infrastructure in […]

Money, Dollar, Person

Abu Dhabi launches $5bn bond issue after 3 years

Abu Dhabi has initiated $5 billion in three-tranche bond issue after a hiatus of three years, according to a media report said. The $1.75 billion five-year bond, 1.5 billion 10-year tranche and $1.75 billion 30-year issue was priced at 35, 45 and 90 basis points, respectively, over US Treasuries, fixed income news service IFR reported. Abu […]

A square in Cairo

‘Worst is behind us’ in Egypt’s black market dollar war says BMI

The Egyptian government’s priority for 2024 should be to keep the gap between the official and parallel exchange rates for Egypt’s pound and the US dollar as narrow as possible, says BMI Research. In a webinar on Tuesday BMI, a Fitch Group firm specialised in country risk, said that “the worst is behind us” in […]