Political crisis was bad news for business performance in 2019, survey finds

21% of Maltese businesses participating in a survey conducted by the Malta Chamber of SMEs claimed that political instability resulted in a decrease in sales in 2019.

33% of businesses said that sales decreased in 2019, 26% said that sales remained the same while 41% claimed that sales increased.

When compared to how businesses responded to a similar survey in the previous year, the results show that businesses were negatively affected in 2019. In 2018, more than half, 51%, of businesses reported an increase in sales while only 17% reported a decrease.

In 2019, respondents said that Black Friday was a pitiable affair — 53% of businesses said that Black Friday proved below expectations, while only 8% said that it had exceeded their expectations.

In 2018, the Malta Chamber of SMEs, previously known as GRTU, had reported that Black Friday sales had broken all records. That wasn’t carried on to 2019 as a survey carried out by them last December found that 65% of businesses were reporting plummeting sales due to political instability.

When asked what factors led to a bad showing during Black Friday, 31% of businesses cited the political instability which culminated in the resignation of former prime minister Joseph Muscat and 10% said that traffic congestion was also a contributor.

Those who reported an increase in profits said that this was due to the introduction of new services and product lines (24%), and the increase in population and consumption (19%). They still claimed that 2018 was a year that was hard to beat in terms of sales.

Those who reported a decrease in profits said that higher operational costs were the culprit (20%), and higher staff costs (15%).

In 2019, 39% were satisfied with sales during the festive season. In 2018, 49% were satisfied. In 2019, 21% of businesses all around Malta claimed that they were dissatisfied with sales during the festive season. In Valletta, this statistic rose to 40%, as continuous protests in the capital during that time deterred shoppers.

15% said power cuts were also to blame. MaltaToday had reported how a power-cut taking place two days before Christmas forced shops to close and many shopkeepers reported terrible sales when compared to previous years.

When it comes to January sales, 38% of respondents said that sales and profits in January were below their expectations, 58% claimed they were in line with their expectations, while only 4% said that January sales had exceeded expectations.

Businesses were largely sceptical about whether the situation would improve: 39% of respondents said 2020 would prove the same as the previous year, 37% were hopeful that sales would improve, and 24% said 2020 will be better.

However, 25% of businesses said that despite everything, they would expand their business on the island in the coming years.

Predicted challenges for 2020 cited were: increase in costs (13%), labour shortage (11%), increase labour costs (10%), political instability (10%), increased regulation and compliance costs (7%), economic instability (7%), bureaucracy (6%), and overpopulation (2%).

The survey concluded that, “as expected, 2019 was slower than 2018 but even slower than expected and that over the whole year, turnover fared better than profitability.”

It found that 2020 started below expectations so far and that the political crisis had an effect on the festive season but dented overall business performance in 2019.

“The timing the survey was carried out is important… the political scenario was very sensitive at the time. It affected the sentiment of businesses in how they looked back on 2019,” the Chamber's CEO, Abigail Mamo said.

300 respondents participated in the survey that was conducted between 9 to 24 January 2020 and accounts for a 6% margin of error.