Surcharge, rising costs blamed for fall in profits

A third of Malta's small entrepreneurs expect business to be worse for the rest of the year than in the first four months of this year, a survey shows.

Over half think business will remain unchanged while 15 per cent think their situation will improve from now till the end of the year.

According to a survey conducted by the Chamber of Small and Medium Enterprises - GRTU, the prevailing feeling is that profits will be hit by an increase in the cost of sales, the water and electricity surcharge, the tax burdens and a lack of economic growth.

According to the survey, carried out between January and April across different business sectors, 52 per cent of businesses saw their turnover go down by between 10 and 30 per cent over the same period last year while 63 per cent saw profits decline by the same margins. Those who said their business had done better attributed this mainly to having increased the variety of products or services they offer. Just five per cent attributed their growth to doing more advertising while four per cent said they had given a lot of discounts.

Those who saw a fall in profits blamed increased costs (50 per cent), the electricity surcharge (39.4 per cent) and a lack of economic growth (29.5 per cent). They also pointed to increased competition and higher costs in complying with regulations.

Despite the pessimistic outlook, 70 per cent said they would keep all their employees. Just 11 per cent said they would employ more workers in the coming months while 19 per cent said they would have to lay off workers.

GRTU director general Vince Farrugia described the prospects as "worrying", saying the findings confirmed the feeling that the water and electricity surcharge was having a negative effect on business.

The GRTU was urging the government to introduce measures to mitigate the surcharge, he said. One possible step would be to charge reduced electricity tariffs at night to supermarkets which had no choice but to operate their freezers 24 hours a day.

Mr Farrugia said that while the national statistics gave an indication of the economy as a whole and could give the impression that Gross Domestic Product was on the rise, sectoral business surveys like this showed that economic prospects were not as bright as projected.

"In reality, it is the government and its entities that have increased turnover. But this is a mopping up of funds from this side to that, and not overall growth," Mr Farrugia said.