• 31% say redundancies were made 
• 39% say wage cuts took place  
• 59% say planned investment is on hold 
• 85% believe further government help is needed

A business survey conducted by PwC highlights a grim prospect for 2020 with 84 per cent of respondents saying their business over the next six months will fare worse than in 2019.

PwC’s latest Middle Market barometer places a spotlight on the retail, manufacturing, hospitality and importer and distributor industries during an unprecedented time for businesses in Malta.

Over 160 businesses participated in this survey, which was carried out during May and June, amid the COVID-19 crisis, just before the the government announced a special stimulus plan on June 8.

Retail (clothing) and restaurants appear to have suffered most from the COVID-19 pandemic, the majority of which reported a decrease in revenue to the tune of 75 to 90 per cent. During May, businesses involved in clothing and fashion were still registering very low sales and most of the turnover being reported was being sourced from online portals rather than from footfall. This naturally also impacted the importer and distributor industry – who also reported a decline in business. 

Thirty-one per cent of the participants across all industries have indicated that during the past months a number of their employees were made redundant.

Redundancies have been more acute in the restaurants sector. Forty-nine per cent of restaurants stated that they terminated employment contracts. This is followed by operators in the retail clothing business, at 21 per cent.

The market also experienced wage cuts – 39 per cent of the total participants in the barometer answered ‘yes’ to a question on whether such measures have been taken. Again, the higher incidence of such cuts was experienced in the fashion and food and beverage industry. 

Another noteworthy signal coming out from the barometer is the propensity of businesses interviewed to keep up with the investment plans they have put in place before the outbreak of the pandemic. Fifty-nine per cent of the respondents interviewed indicated that they will be putting breaks on planned investment programmes.

Restaurants, at 82 per cent, top this list, followed by retailers, at 50 per cent. In terms of scaling down existing business operations, 21 per cent indicated that they are working on such plans. Businesses involved in the clothing and fashion industry appear to be the more downbeat, as evidenced by 43 per cent of those who are stating they intend to scale down current operations. 

Business outlook for the next six months is negative and the need for further support is likely

The participants in the barometer were also interviewed about their plans on the workforce for the short and medium term. Thirty-eight per cent suggest that it is likely that they will make employees redundant. Sixty-two per cent have no such plans.  This concern is more acute within the restaurant sector – where 53 per cent of those interviewed indicated they are working on redundancy plans. 

The results of this market barometer suggest that during the past months, the major challenge local businesses had to face was the preparedness and adaptation to the new realities, including new distribution channels. 

Fifty per cent of the respondents stated that they faced challenges to adapt in such a short period of time to the change brought about by the restrictive measures announced by the national authorities. Common issues included websites (which could facilitate online business) not being fully functional, inadequate stock levels (for essential goods retailers) and other logistics and distribution issues. 

As expected, supermarkets and similar outlets experienced a surge in business. Forty-two per cent of those interviewed estimate that they experienced an increase of 50 per cent in turnover and the same 42 per cent employed more people during the past months.

Despite uncertainties and challenges brought about by the pandemic, the barometer emanates the strong resolve and resilience of the local businesses to adapt to the new realities.   

Sixty-seven per cent of respondents have considered implementing changes in their processes, namely for the purpose of safeguarding the health of their employees and customers in seeking new distribution channels and embracing innovative processes.  The encouraging messages coming from the feedback obtained in the barometer indicated that in the process of adaptation to the new challenges, many businesses implemented innovative processes, such as cashless payments and contactless deliveries. 

The willingness to change and seek innovation is consistent among all industries and can be interpreted as a signal that indicates the will of local businesses to embrace further the digital reality and embark on a transformation journey to emerge stronger from this crisis.

Fifty-nine per cent of the respondents answered ‘yes’ to a question on whether any new business initiative has been organised through a digital platform. 

The barometer also sensitises the feedback and take up of the government support initiatives, which have been welcomed across the board.  Eighty-five per cent of all those interviewed benefitted from COVID-19 support schemes, and 80 per cent think that such measures were effective. Another 85 per cent believe that further incentives are needed. 

Many businesses expressed their wish to avail themselves of subsidies to address rental costs and to continue benefitting from the wage supplement in the short term. Other common suggestions put forward by businesses include the relaxation of rules pertaining to income tax and VAT in the short term.

David Valenzia, territory senior partner at PwC Malta, said that “the results emanating from this barometer, while indicating a significant level of uncertainty across the economy, also signal the resilience of local businesses who are placing innovation and agility at the heart of their strategy to respond to this crisis. The results suggest that, while the government COVID-19 support schemes have clearly assisted businesses during this unprecedented period, business outlook for the next six months is negative and the need for further support is likely.”