SMEs report drop in sales

Small businesses are reporting a slump in the second half of the year over the previous six months and predict a poorer 2009.

Seven in 10 small enterprises fared worse in the second half of this year than in the same period last year and are predicting a poorer 2009, according to a survey carried out by the Chamber for Small and Medium Enterprises.

Only nine per cent of businesses experienced a rise in their profits while 16 per cent remained the same. More than 60 per cent, the majority employing up to 10 people, have seen a fall in turnover by up to 30 per cent.

The survey findings were presented during a half-day conference on the economy organised by the chamber to kick off its 60th anniversary celebrations.

The bleak results come as Malta braces itself for higher energy bills which, according to 15 per cent of companies, are the reason for an expected downturn next year.

Just over 40 per cent believe they will fare worse because the economy will not grow, 18 per cent because their competition will continue to reduce prices and 15 per cent because of increasing running costs. Addressing the seminar, Economist Gordon Cordina said he was concerned that SMEs were only tackling their day-to-day problems rather than looking ahead and finding ways to innovate.

But GRTU general director Vince Farrugia said many businesses were not making the needed changes simply because they did not have enough money.

In fact, economist Edward Scicluna expressed concern about the lack of liquidity in the economy and urged the government to ensure that pending payments are made as a matter of urgency. “A patient needs oxygen at the time he enters the Intensive Therapy Unit and not a week later,” he said, making an analogy.

He called on the government to be ruthless in the removal of monopolies and said that unless it drastically reforms its expenditure, there is a chance it will be unable to control it, as was already happening in the health and tertiary education sectors.

Similary, Labour economy spokesman Gavin Gulia said it was imperative to find ways to reduce cash-flow constraints and improve working capital and liquidity.

Banks, he added, needed to be encouraged to refrain from introducing hefty charges by stealth and the government must intervene to ensure their rates reflect the interest rate cuts made by the European Central Bank.

High on the agenda of yesterday’s conference was the global economic downturn. Prime Minister Lawrence Gonzi said Malta has managed to show resilience, with the economy growing by 2.2 per cent in the third quarter, substantially above the EU average. He added that the country could not be scared of challenged and change, although prudence was important.

He said Malta needs more new dynamic companies willing to exploit the benefits of the single market and capable of creating innovative projects.

Earlier Dr Cordina said Malta had the opportunity to tap into international real estate by selling vacant properties in holiday areas to foreigners over a 15 year period and injecting an extra 250 million euros a year into the local economy. This would be possible if the island captured less than one per cent of the British market and it would not crowd out resident buyers since there would still be around 20,000 vacant properties available.

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