Gozo businesses remain upbeat, but worries creep in

Gozitan businesses continue to report positive business conditions, with half of all businesses saying they intend to hire more workers and almost two-thirds planning investments.

But while the net balance of Gozo-based firms reporting improved business conditions has reached its highest ever recorded level, there are rising concerns regarding sales volume and cost pressures.

The insight emerges from the latest version of the Gozo Business Sentiment Survey, a study carried out twice a year by the Gozo Regional Development Authority and Gozo Business Chamber.

The latest edition of the survey, published Saturday, reveals how Gozitan businesses are increasingly cosmopolitan affairs, with two in every three employing at least one foreign worker and 20% saying more than half their workforce is foreign.

Business conditions

Between March and September, 38% of firms indicated that their business conditions had improved, up from 30% in the preceding six-month period. Only 8% reported a decline, half the level of the previous round.

Those two opposing swings meant that the net balance of firms reporting improved conditions hit 30%, up from 14% in the previous survey round.

Sentiment was especially strong within the accommodation and food services sector, reflecting strong business during the peak summer months.

Challenges and threats

However, the survey also reveals some significant and potentially dangerous headwinds for Gozo businesses.

Labour shortages continue to limit growth, with 53% of businesses citing them as their primary concern; shortages are especially acute in the education, health and ICT sectors, the survey indicates.

Rising input costs are squeezing margins, especially in hospitality and construction. The share of firms citing them as an issue was up four percentage points to hit 40%

And a growing number of firms are predicting a sales slowdown, with 26% forecasting a slowdown. That was especially evident within the wholesale and retail sector (56%).

Around one in every three firms (32%) say they expect to raise their prices over the next six months. In March, 31% said they would raise their prices while a year ago 39% said they would. 

Just 1% of firms said they intended to slash selling prices in the coming months.  

Outlook

Business outlook remains positive, though expectations have moderated since March, when the previous survey was published.

Around one in every four firms expects business conditions to improve in the next six months, down sharply from the 41% level reported in March. The share of businesses expecting conditions to worsen rose to 15% from 9% in March.

Despite cooling expectations, investment intentions remain strong. 63% of firms say they have capital expenditure investments in the pipeline and around 50% say they intend to hire workers in the coming six months. Demand for labour is shifting toward technical and computer skills, rather than general labour.

Workforce diversity

Many of those new workers are likely to be non-Maltese. 65% of Gozitan businesses now employ non-local workers and in large firms made up of 50 workers or more, the majority of workers are non-local.

Businesses acknowledge some challenges in integrating non-local workers into their firms: language barriers are a primary concern, followed by cultural differences. But it appears firms are quickly adapting: 80% said they have diversity policies in place and more than half of all surveyed businesses said they felt confident in their ability to manage a diverse workforce.