Calls for reform as SME barometer shows businesses face labour shortages, inflation challenges

The SME Barometer Q2 2024 survey, conducted online among 423 Maltese companies from April to July 2023, highlights major challenges, including labour shortages and rising inflation and offers recommendations to improve Malta’s business environment and economic prospects.

The survey, conducted online from 21 April to 3 May 2023, with follow-ups from 5 July to 15 July 2024, received 423 responses from companies.

Of the respondents, 51% had 1-9 employees, 30% employed 10-49 people, 16% had over 50 employees, and 3% had 249 or more employees.

The businesses surveyed spanned multiple sectors. Retail, import, distribution, and wholesale were the most common, representing 45% of responses.

Other sectors included tourism services, professional services, manufacturing, construction, machinery, and production (each at 14%), food and beverage (8%), entertainment, marketing, and events (7%), education, training, and schools (6%), wellness and personal care (9%), household and office products (3%), and transport (5%). The remaining 8% comprised other services.

The survey identified critical challenges facing these businesses. The most significant issue was a shortage of employees, impacting 45% of respondents.

Unfair competition was mentioned by 24%, while 22% highlighted inflation. Late payments troubled 17%, reduced client demand and skills gaps affected 16%, and traffic congestion and heightened competition was at 14%.

Additionally, 13% expressed worries regarding the processing of visa applications for third-country nationals, 12% were troubled by transport costs, and 9% cited banking information and compliance requirements.

Excessive bank charges impacted 8% of participants, while 6% were affected by the need for upgrades and disruptions due to infrastructure work.

Access to finance and increased interest rates concerned 3%, and 5% faced unspecified issues.

Survey participants emphasised critical national issues they wanted the government to address. The primary concern was the lack of good governance, noted by 39%, followed closely by corruption at 36%.

Overpopulation worried 34%, while 20% were anxious about rising inflation. Preserving quality of life was important to 17%, and 15% cited environmental concerns.

Ease of doing business and consumer buying power troubled 12% each, while education concerned 9%.

Competitiveness and tourism sector appeal were issues for 7%, and 6% cited the public sector deficit. The international situation and safety and security were less pressing, cited by 3% and 2%, respectively.

Opinions on Malta’s direction were divided, with 24% believing it is moving in the right direction (down from 28% in Q1 2024 and 20% in Q4 2023).

Conversely, 76% felt the country was heading in the wrong direction.

Regarding the investment outlook for the next year, optimism slightly decreased from 16% in Q1 2024 to 14%. A majority of 53% expressed uncertainty, while 33% believed it was not a favourable time to invest, up from 27% in Q4 2023.

The survey highlighted several recommendations for the government. It stressed rebuilding trust in the economy and promoting a positive business outlook.

Enhancing governance and commitment to public service was considered crucial. Implementing tax cuts for businesses, as outlined in the 2022 electoral manifesto, was suggested to bolster cash flow and stimulate reinvestment.

Additionally, reforming Malta’s public procurement system to ensure transparency and good governance was recommended.

According to the recommendations, effective urban planning, investment in infrastructure, and adoption of sustainable development measures can address overpopulation.

Competitive strategies to attract and retain high-quality foreign talent and a national strategy to tackle skills shortages were advised.

Urgent action to eliminate hidden taxes on essential consumer goods was deemed necessary to address inflation.

Lastly, combating governance and corruption issues with integrity and prioritising national interests over political agendas were considered crucial steps for the government.