Employee shortages hurting SMEs across the board, survey shows

Employee shortages are the principle concern for small and medium enterprises, a survey released on Monday by the Chamber of SMEs has found.

The SME Barometer produced by MISCO, a research firm, showed that 19% of surveyed businesses identified employee shortages as their main concern.

Abigail Mamo, Chamber of SMEs director general, said the concern on employee shortages cuts across the board.

“The problem is being felt across all sectors and at all skill levels, which makes relying on foreigners a must,” Mamo said.

The issue is no longer a question of processing bottlenecks for third country national visas by Identity Malta, she added, but one that requires a new strategy to attract the right people. “We may need to target new countries and different skills.”

Mamo said the employee shortage experienced during the COVID pandemic was now a closed chapter. “The head counts today are very close to what they were pre-pandemic but what SMEs are finding is a lack of quality, lack of training and lack of skills across the board,” she added.

The same survey found that 7% of SMEs consider skills mismatch to be a main concern.

However, the second highest concern for businesses is rising inflation with 14% identifying this as a problem.

“Inflation impacts businesses’ competitiveness, which is why it is of concern to SMEs as much as it is for consumers,” Chamber of SMEs President Paul Abela said.

He fended off accusations that businesses were to blame for rising inflation because of unreasonable product mark-ups, especially when international freight costs were dropping.

“Freight costs have dropped for imports from China and particularly because of Chinese government subsidies. But not the same can be said of imports from Europe, where the primary issue is scarcity that is pushing up prices from abroad,” Abela said.

Chamber of SMEs Vice President Philip Fenech said one other aspect feeding into inflation was restaurant prices that are reflecting the new, higher commercial rent regimes.

According to the survey, the concern with inflation is also one on which businesses want more government action.

The survey found that 23% of SMEs identified inflation as the top issue they want government to act on, followed by lack of good governance, which was identified by 22% of businesses.

“Lack of good governance has to do a lot with lack of enforcement as much as it has to do with reputation,” Abela said.

The ease of doing business in Malta, the environment and consumer buying power were each identified by 11% of SMEs as areas where government is expected to do more.

Redefining strategy

Asked whether Malta is moving in the right direction, 35% agreed but 65% said the country needs to rethink its direction.

On their appetite for investment, 55% of SMEs said they were not sure whether they would invest to grow their business this year, 29% said it was unlikely and 16% said it was a likely prospect.

The majority of SMEs (64%) believe their business will grow at a slower rate this year than the economic growth of 3.7% forecast by the Central Bank of Malta. However, 28% of SMEs believe that their companies will grow at the same rate and 8% believe their businesses will grow at a faster rate.

Issues of concern to SMEs

• Employee shortage 19%
• Increase in inflation 14%
• Issues with late payments 9%
• Unfair competition 9%
• Skills mismatch 7%
• Information and compliance 6%
• Excessive competition 6%
• Traffic congestion 6%

Source: SME Barometer, Chamber of SMEs and MISCO