80% of SMEs believe Malta is moving in the wrong direction, 16% more than Q2 – SME Barometer
Eighty per cent of Small and Medium-sized Enterprises (SMEs) believe that Malta is moving in the wrong direction, according to the results of the SME Barometer for the third quarter of 2023 that were presented by The Malta Chamber of SMEs on Friday.
This is a 16% increase when compared to the results in the second quarter of this year.
The SME Barometer, a quarterly survey providing insight into economic trends, business sentiment and the state of smalland medium-sized enterprises in Malta, was conducted by the Malta Chamber of SMEs in collaboration with Misco, and the results were announced in a press conference on Friday. The press conference was addressed by SME Chamber president Paul Abela, CEO Abigail Agius Mamo, deputy president Philip Fenech and Misco director Lawrence Zammit.
The survey had a total of 423 respondents and was conducted between 11 and 20 October, with a 4.9% margin of error.
The majority of participating businesses fell within the micro-enterprise category, with 50.35% employing fewer than 10 individuals; 33.81% of participating businesses fell under the segment comprising companies with 10-49 employees and 13.95% consisted of firms with workforces ranging from 50 to 249 employees.
Companies employing over 249 individuals participating amounted to 1.89% of the survey respondents, reflecting the predominant small business makeup in the country.
Of the participating business sectors, various industries which contribute to Malta's economic landscape were represented. Retail, import, distribution and wholesale dominate at 34%, while other significant contributors include manufacturing, construction, machinery & production (12%), professional services (12%) and transport (12%). The SME Barometer showed that the wellness & personal care and food & beverage sectors each accounted for 10%, while entertainment, marketing & events make up 9%. Other services and tourism services made up 18% and 6% respectively. Education, training & schools, and household & office products made up 6% and 5% of respondents respectively.
The survey asked respondents to choose the two biggest issues their business is currently facing, with the data revealed that in general and across the board, the most pressing issues across all business sizes are the employee shortage by far, increase in inflation and unfair competition. Traffic congestion ranked fourth in the issues businesses face.
Zammit said that employee shortage does not always mean a problem in recruiting employees, but also entails the quality and skills of the employees.
Abela said that government must make up its mind on whether to close the tap on foreign labour, with businesses complaining of an employee shortage that can only be solved by bringing foreign labour to the country.
He said that everyone wants to "change the economy" but the most worrying issue is the inability to find workers, and government must make up its mind on whether it wants to put the brakes on the amount of foreign workers coming to Malta.
Lower client demand was one of the new choices that was presented for this quarter, which also scored high as an important issue businesses are facing.
The main contributors to business concern, with regards to the national situation across all sectors, was the level of corruption, the lack of good governance and increase in inflation, consistent with the concerns recorded from the previous quarter (Q2 2023), the SME Barometer showed. Fourth ranked was overpopulation, a newly presented choice.
Mamo said that overpopulation is linked to abuse, such as manipulating foreigners into coming to Malta and who then end up without a job with several individuals living in a single room, which poses as a significant concern affecting businesses.
"It is clear Malta is dependent on foreigners but businesses are saying this abuse needs to be tackled," Mamo said.
Zammit also emphasised that it is clear that in terms of good governance, corruption and overpopulation, it is evident that some form of direction as to where the economy is going needs to be established.
Eighty per cent of businesses think that Malta is moving in the wrong direction, a significant increase in a short span of time from the second quarter of 2022, which recorded just over 60% of businesses who thought that the country was moving in the wrong direction. Meanwhile, businesses who thought that Malta was moving in the right direction decreased from just under 40% in Q2 2023 to 20% in Q3 2023.
Mamo said that the business overall sentiment shows a level of discomfort with the direction they see Malta heading towards. Zammit commented that these results reflect data published by the EU Barometer, which showed a survey on business sectors, displaying the same types of issues.
Respondents were asked if they believed that in the next 12 months, it would be a good time to invest. Abela said that a substantial majority, 54.50% of businesses are not certain, which poses particular significance.
"Sectors of businesses want to, and have the appetite to invest in Malta, but the uncertainty keeps them back, otherwise they would have said no," Abela said. The SME Barometer showed an increase in respondents who said that it would not be a good time to invest in the next 12 months, while those who responded with "yes" have decreased.
Fenech said that support services in the country have improved, but not enough to reach the country's demand, referring to traffic management, cleaning and more.
The members also expressed concern on the waste management schedule, run by regional councils, which they said showed a lack of governance, as if the government "did not want the local councils and wants them to die a natural death".
Businesses are also still facing considerable uncertainty when it comes to making investment decisions for the next year, predominantly micro-businesses, followed by small businesses, the SME Barometer showed.
Almost 60% of companies with a headcount of 50-249 employees said they were unsure in making investment decisions for the next year.
Micro-businesses (one to nine employees) and small businesses (10-49 employees) also showed a high level of uncertainty.
The last question asked businesses, which are the two main contributors leading to inflation within their business, a question changed each quarter in accordance to the relevant topics at the time.
Businesses believe that the main contributors leading to inflation are due to employee wages and salary costs, which included high employee turnover, investment lost as well as the cost of bringing employees from abroad, the SME Barometer showed.
This was followed by costs of products coming from abroad, with many businesses frequently concerned that product prices continue to increase, as well as rent costs, ranking third.
Transport costs, which includes freight (costs from abroad) have heavily increased, and while in Malta, fuel and energy costs are subsidised, transport costs from a foreign country are affected from increases in fuel prices.
On this, Abela remarked that there is a huge problem in freight cost when it comes to, for example, the Virtu Ferries compared to Ponte Ferries, as prices have remained high due to no other competition.
Zammit said that the country's rate of inflation is higher than the rate in the eurozone and operating businesses must not lose their competitivity.
He said that wage inflation is a huge contributor, and in line with this, productivity must be increased so that the quality of the products does not suffer, rendering any wage increases and investment as short-lived.
Overall, the SME Barometer showed high concern regarding the nation's direction coupled with a growing sense of unease within the business community.
Moreover, inflation, employee shortages and unfair competition are the top-priority concerns for businesses and the SME Barometer also showed an escalating apprehension among businesses related to good governance and the level of corruption, while they remain uncertain about their investment plans for the upcoming years.