The Business Performance Survey for the first half of 2010, conducted by the Chamber for Small and Medium Enterprise – GRTU, contains some encouraging indications that the worse effects of the recession may be behind us, even if the way ahead remains challenging.
While 53 per cent of respondents indicated that their turnover was below that of 2009, the fall was described as being small. Similarly, 61 per cent of businesses said that their profits were marginally lower than in the first half of last year. While this may indicate that the slide in business activity is still on, it also shows that the bottom may have now been reached and the recovery is gaining momentum.
As confirmed by the director general of GRTU, Vince Farrugia, other aspects of the survey show that the level of optimism among the business community is beginning to rise. Despite lower profits as a result of the recession, a sizable 34 per cent of enterprises are planning to invest more to expand their business. Another 63 per cent show no intention of discharging employees in the coming months.
There are, however, other issues that emerge from the survey that need to be addressed. Over 68 per cent of respondents described the support services given by government departments as “poor”. The GRTU maintains that “the government has to reduce bureaucracy, taxes and the cost of energy to help business”.
These issues keep cropping up whenever the state of small businesses is put under the microscope. More needs to be done by the public administration to make the commitment to support business a reality, rather than a mantra used as a public relations tool. The tackling of useless bureaucracy should indeed be a priority.
A similar negative indication is that banks are not doing enough to support micro and small enterprises. The aversion of banks to lend to small business may be behind the inability of these enterprises to commit to more investment that generates growth. This trend is not unique to Malta and various EU governments are putting pressure on banks to lend more to business.
The Micro Credit Scheme announced in the last Budget has so far failed to deliver the results it promised. This needs to change. If small businesses are starved of financing, the recovery may take longer and be more arduous during the coming year.
The prospects of small businesses that mainly consist of retailers, wholesalers and small service providers can only be gauged correctly in the context of the performance of the bigger economy. As confidence builds up in the bigger economy because of improvements in the results of export-oriented companies, in the tourism industry, in the financial and electronic gaming sectors, consumers will be encouraged to spend more.
The news from these fronts seems to be improving gradually and this can only mean that the optimism registered in the GRTU survey is well founded. The markets on which we depend to sell our goods and services are showing signs of recovery that will eventually ensure our factories, hotels, shops, restaurants, workshops and offices are kept busy.
Ultimately, small businesses also have to do their part to become more competitive in a world where consumers, including in Malta, have a choice of where to procure the goods and services they need.
The first green shoots of recovery can only grow if the business community promotes consumer-friendly practices.