Cost pressures overtake staffing concerns as Gozo business community fears Middle East fallout

According to the latest Gozo Business Sentiment Survey, for the first time since September 2023, cost pressures have overtaken staff shortages as the most pressing concern facing Gozitan businesses. Nearly half of respondents (49 per cent) cited rising costs as a major challenge, up nine percentage points from the previous survey.

The report, jointly published by the Gozo Regional Development Authority and the Gozo Business Chamber, notes that the findings are the first to reflect the potential impact of escalating tensions in the Middle East, which have contributed to higher international energy and transportation costs. While Malta continues to subsidise energy prices, businesses are still experiencing increased costs through imported goods and services.

The shortage of suitable employees remains another major issue, highlighted by 48 per cent of respondents. Nevertheless, concerns about labour availability declined slightly compared to the previous survey.

Despite these challenges, business expectations remain highly positive. Almost half of respondents (48 per cent) expect conditions to improve over the next six months, while only 10 per cent anticipate a deterioration. This resulted in the highest forward-looking net balance recorded since the survey began, standing at 38 per cent.

Meanwhile, 58 per cent of businesses reported that conditions had remained unchanged during the previous six months, while 34 per cent said conditions had improved. Only 9 per cent reported a deterioration.

The survey found that overall business sentiment remains significantly above historical averages, with a net balance of 25 per cent, although this was slightly below the record high registered in the previous survey round. Manufacturing and construction businesses reported the strongest improvement in business conditions, while accommodation, food services, and information and communication activities also recorded positive sentiment.

Price expectations also point to mounting cost pressures. Around 76 per cent of businesses expect the prices of goods and services they purchase to increase over the coming six months. Yet most respondents indicated they do not intend to pass these higher costs directly onto customers, with 68 per cent expecting their selling prices to remain unchanged.

The survey also highlighted continued strength in the labour market. Nearly two-thirds of businesses (63 per cent) indicated plans to recruit additional employees in the coming months, with demand strongest for technical, machinery-related, computer and communication skills.

Investment intentions remain robust as well, with 64 per cent of firms expecting to undertake capital expenditure during the next six months. Transportation and storage businesses recorded the strongest investment outlook.

The survey’s special focus on financing found that 64 per cent of businesses currently use some form of external finance, most commonly bank loans and credit facilities. While more than a third of respondents described access to financing as relatively easy, a significant proportion either lacked sufficient information to assess the process or considered it relatively difficult. Administrative requirements and documentation burdens emerged as the most commonly cited obstacles.