Companies which do not adapt their strategies to overcome COVID-19 challenges could find themselves out of business come next year, Malta Enterprise CEO Kurt Farrugia has warned.

Farrugia said that businesses cannot keep expecting to survive off government handouts without developing improved ways of operating.

“Businesses which take the opportunity to adapt will likely be better off by next year, while others which don’t will be cast adrift. The same applies for employees; those who do not adapt their skill-sets might end up losing their employment,” Farrugia said.

“The upcoming months will be crucial for reaping the benefits of these efforts to invest and re-engineer business models,” he added.

Farrugia said that Malta Enterprise had adapted its aid schemes to incentivise businesses to adapt their operations to the current climate and “improve their odds of survival”.

Malta Enterprise CEO Kurt Farrugia. Photo: Mark Zammit Cordina

The Malta Enterprise CEO was speaking during a discussion based on a survey carried out by the Malta Chamber of SMEs (small and medium enterprises).

Survey results suggest Farrugia’s message has yet to chime with many business owners, with half of the survey respondents saying they had no plans to change their business model over the next six months.

Chamber of SMEs president Abigail Mamo noted that 18% said they were planning on moving their operations online, with another 18% planning to reduce their number of employees. Just 17% said they wanted to implement diversification of strategy.

“This is particularly concerning,” Farrugia said.

Respondents' percentages about turnover rates comparing 2020 to 2019. Source: Chamber of SMEs

“This is hardly the time to lie in bed and wait for supplements and better times to keep you afloat. This is why we recently announced a scheme that links consultants with businesses struggling to find re-engineering ideas,” he added.

Mamo noted that 79 per cent of the 300 survey respondents said that their turnover has decreased by at least 10%.

“Just 11% said that their turnover has actually increased by at least 10%, most of whom were businesses related to fields such as interior design, construction, IT and telecommunications,” Mamo said.

Respondents' percentages about how long they think their business will survive. Photo: Chamber of SMEs

Farrugia noted that the pandemic-induced economic slowdown had also hurt private entrepreneurs who had invested in their business in 2019 and were hoping to reap the rewards of that investment this year.

“We had to consider wage supplements as life support for these companies. We also had to consider what to do with a significant chunk of businesses who viewed these supplements as merely a lifeline to extend their business’ life by another three, maybe six months at best,” Farrugia said.

Malta Enterprise’s CEO was referring to the 25% of respondents who estimated their business’ survival would be anywhere between three - six months.

“Should we keep businesses that have no plans alive for the next three to six months? We shouldn’t switch off life support as of yet; however, these companies must find a way to do so in order to keep going, as otherwise our help won’t be useful either way,” he added.

Mamo also presented the various issues which both employers and employees highlighted as their main concerns throughout this past year.

Employers were largely concerned by uncertainty, low turnovers and government aid being halted. In a separate listing, commercial rental prices, increased difficulties in banking negotiation and issues with logistics were also high on their list of concerns.

Respondents' percentages related to their biggest concerns as employers. Photo: Chamber of SMEs

Farrugia stated that the government has also thought of schemes to help employers cover their costs, with a particular mention of rental and electricity costs being at least partially covered through funding.

Similarly, employees were also concerned about uncertainty and lack of security. Those concerns were exacerbated by issues related to mental health, deprivation of social contact and a general lack of motivation.

Both Farrugia and Mamo also highlighted the fact that the government wishes to extend wage supplements, with Farrugia hinting at changes to be implemented by the end of December.

He made specific reference to how the parameters for wage supplements must be revised and widened to better cater for different sectors to ensure maximum support is given where it is needed most.

Mamo explained how about 70% of respondents in the survey stated that they agree with supplements and their importance to safeguard employment.