Cost pressures top Gozo business concerns as Middle East crisis continues

Cost pressures have emerged as the most pressing concern for businesses in Gozo in a report measuring enterprise confidence on the island.  

For the first time in almost three years, cost challenges are the most pressing issue for Gozo firms, surpassing longstanding concerns over staff shortages. 

While the perceived challenges of cost pressures had continued to decrease since September 2023, with only a “modest” increase two years later, by March this year, cost had emerged as the most pressing issue. 

Almost half (49%) of participants reported cost pressures, an increase of nine percentage points over the last edition of the Gozo Business Sentiment published by the Gozo Regional Development Authority and the Gozo Business Chamber. 

Cost challenges were “particularly evident” within transport and storage activities, followed by accommodation, catering and construction activities. 

But while costs to businesses were expected to rise, with three-quarters (76%) of firms fearing cost hikes over the following six months and a quarter (26%) saying they expect costs to remain at current levels, projected selling prices were not affected.  

Most (68%) respondents said they did not expect to raise their prices, while a third (33%) indicated they intended to. These levels were broadly in line with the levels seen a year earlier.

The authors noted that the latest report was the “first to capture the potential implications of higher international energy and transportation prices driven by the escalated conflict in the Middle East”, in reference to ongoing hostilities between the US and Iran. 

“Although energy prices in Malta remain subsidised, higher global energy costs still feed through as they impact the prices of imported inputs”, the report said, while noting that some respondents had highlighted business uncertainty over potential shipping delays and higher transport costs.

But while cost concerns have become the most pressing business concern, a “lack of suitable employees ... remains a very pressing challenge”, it said.

Staff shortages were especially felt in the education, health and social work sectors, while the construction, accommodation and catering sectors also recorded a “notable share” of staff concerns.

Stable outlook

Despite unease over cost and staffing challenges, Gozo businesses largely reported a stable outlook, recording unchanged business conditions over the past six months and an improvement over the same period last year.

Businesses reporting worsening conditions (9%) were almost half that reported six months ago (16%).

“The net balance points to an improvement in sentiment, standing at 25%, which remains well above the 11% average recorded across all survey rounds.”

The manufacturing and construction sectors registered the largest share of improved business conditions, followed by the services industry – in particular accommodation and catering, IT and communications.

Hiring

Looking ahead, almost two-thirds (63%) of firms said they were considering increasing their workforce over the following six months, while almost a third (30%) said they had grown the number of employees in the preceding six months.

Computer and machinery-based businesses were most interested in increasing their workforce, “highlighting strong demand for technical and operational competences across the local economy”.

Firms also reported a need for communication and collaboration-focused workers; however, "suggesting that interpersonal abilities are valued alongside technical expertise”.

No demand was recorded for agriculture, fishing or creative sector jobs.

Investment

Meanwhile, more than half (56%) of firms said they had reinvested in their business in the preceding six months, with investment mainly seen in the knowledge sector – covering businesses based on technology and human capital, such as gambling, fintech and data analytics.

Almost two-thirds (64%) of Gozitan businesses said they planned on making capital investments in the following six months.

The survey was carried out in March this year using the same methodology as in previous editions, the authors said, “ensuring a reliable sample size and sector representation”. Further information was not available at the time of publication.