Skills shortages overtake tax reform as top threat to Malta’s investment attractiveness

Malta has seen a strong rebound in investor sentiment, with 79 per cent of foreign investors describing the country as an attractive location for foreign direct investment (FDI) – a sharp 25 percentage point increase from last year’s 54 per cent.

The EY Malta Attractiveness Survey 2025 reports a broad-based recovery in confidence following a temporary dip in 2024. However, the findings also warn that execution is now critical, as competitiveness increasingly hinges on the availability of skilled labour and adequate physical infrastructure.

Malta’s key strengths

According to investors, Malta’s top FDI attractors remain corporate taxation (78 per cent), stability of the social climate (70 per cent), and telecommunications infrastructure (68 per cent). The report highlights that Malta’s cost base is still considered competitive compared to other jurisdictions – particularly in taxes (62 per cent), energy (58 per cent), and payroll (48 per cent).

Furthermore, 67 per cent of respondents said Malta is “as attractive or more attractive” than other European investment destinations – up 13 percentage points from 2024.

Challenges

While sentiment has improved overall, investors remain concerned about Malta’s R&D and innovation environment (20 per cent) and its transport and logistics infrastructure (18 per cent), which continue to rank as the country’s weakest points.

Meanwhile, the attractiveness of local labour skills (34 per cent) and labour costs (33 per cent) is showing continued decline, with both figures down significantly compared to previous years.

In fact, skills shortages (60 per cent) have now overtaken tax reform (48 per cent) as the greatest risk to Malta’s FDI attractiveness over the next three years. Other perceived risks include cost competitiveness (42 per cent) and reputation concerns (27 per cent).

Future outlook

Looking ahead, the report reveals that investor commitment remains strong: 90 per cent of companies plan to either maintain or expand their operations in Malta over the next 12 months.

However, confidence weakens when it comes to the long term – while 61 per cent believe their business will still be in Malta in 10 years, one in three investors are uncertain about committing to that timeframe.

Nearly half (47 per cent) of respondents expect Malta’s economy to continue along its current FDI-driven model – combining services, industry, and tourism – while 28 per cent foresee a shift towards higher-value services, and 18 per cent envision a lifestyle-driven economy.

Investors prioritise education, infrastructure, and new sectors

To remain globally competitive over the next decade, investors identified the following as top national priorities:

• Education and skills development (17 per cent)
• Infrastructure, transportation and planning (14 per cent)
• Developing new sectors (13 per cent)
• Ease of doing business (13 per cent)

When it comes to choosing a business location, the most influential factors remain tax competitiveness (55 per cent), workforce availability and quality (52 per cent), regulatory environment (41 per cent), and input costs (39 per cent).

Growth sectors

Services continue to anchor Malta’s economic growth, with tourism (70 per cent), gaming (58 per cent), and payments and fintech (48 per cent) all cited as vital sectors. Emerging engines of long-term growth include artificial intelligence (47 per cent), which 25 per cent of investors identified as the single most promising sector for the coming decade – ahead of tourism (12 per cent), aviation (10 per cent), and fintech (8 per cent).

However, the report also highlights concerns over potential decline in some industries. Gaming (18 per cent) was identified by one in five investors as the sector most at risk of contraction, followed by manufacturing (11 per cent) and special purpose machinery (9 per cent).

EY Malta’s findings paint a picture of renewed optimism tempered by structural challenges. The island’s strong tax framework, political stability, and cost advantages remain key competitive pillars – but the ability to nurture skilled talent, expand infrastructure, and encourage innovation will determine whether this confidence translates into sustainable, quality-led growth.