The economic impact of the pandemic was an unexpected blow, 10 times the size that of the 2008 financial crisis. Left unchecked it would have wreaked havoc on businesses and, consequently, on our workforce.
Just as a reminder, two years after 2008, the number of limited liability companies that were being wound down was still 25 per cent higher than before the crisis. Our industrial workforce was 10 per cent lower, nearly 2,000 workers less. The bank deposits of firms fell by 15 per cent between September 2008 and April 2009.
When firms suffer, workers suffer. The deposits of households fell by €110 million in the aftermath of the 2008 crisis. For the first year and a half after the crisis, unemployment rose from under 6,000 to nearly 8,000.
From a situation where the percentage of the population in severe material deprivation was half the EU average, for the first time Malta’s rate exceeded that average.
We could not let this happen again. In 2020, we launched one assistance package after another, resulting in the largest financial injection to businesses and families in our nation’s history, totalling over €1.3 billion. Malta Enterprise has been at the forefront of this assistance with almost €500 million disbursed to firms. This support has protected 17,700 firms employing over half our private sector workforce.
To give some parallels with our EU counterparts, at its height, the German scheme covered 15 per cent of all employees and now support is down to just five per cent. While our wage supplement provided those on low wages with 100 per cent replacement, workers in Spain only had 50 per cent of their wage protected.
When firms suffer, workers suffer- Miriam Dalli
Our strategy always had two pillars: the protection of productive capacity and incentivising re-engineering and post-pandemic recovery, which is reflected in the schemes and measures launched by Malta Enterprise.
The measures we have just announced have two main aims: direct support measures to inject liquidity and incentives to stimulate economic activity. These constitute another total injection of €20 million to firms, which will be able to carry over tax credits of some €80 million. Taken together, another €100 million in support.
In the coming months, firms that were closed because of pandemic-related restrictions will be able to access again the rent support scheme but with assistance topped up by 50 per cent over and above what they already received in the first rent scheme. The electricity support scheme will be reissued covering up to half of electricity bills during the summer months. Businesses which will remain closed beyond May 10 will be given a grant of €1,000.
We are revamping our business re-engineering scheme so that it will become accessible to self-employed and microenterprises, with aid doubled to a maximum of €10,000 for those companies willing to change to grow. For those firms that have faced serious challenges to continue operating we are introducing the Restart Incentive Scheme to cover advisory costs up to €10,000.
To assist companies kick-start investment and to signal our commitment to transforming our economy, we set up the Smart and Sustainable Investment Scheme, which will provide grants up to €50,000 and an additional 20 per cent support in tax credits.
These incentives will be enhanced for investments made in Gozo, those made by start-ups and those creating new green jobs.
Finally, we are extending the period by which already awarded tax credits can be utilised for another three years. This will benefit close to 9,000 firms.
Several journalists asked whether such assistance is sustainable. My response is once again to point to the past. The penny saved in 2008 ended up being a pound lost in following years. The fiscal deficit was €255 million in 2008 and €249 million in 2012. At the same time, the number of those registering for work in 2012 was a quarter higher than 2008 while those depending on social assistance surged to nearly 12,000.
Ensuring firms survive to grow once more is the only way we can assure the sustainability of public finances going forward. Moreover, we need strong businesses if we are to achieve the transformation needed to become a carbon neutral society.
Miriam Dalli, Minister for Energy and Enterprise
Independent journalism costs money. Support Times of Malta for the price of a coffee.Support Us