Issues with late payments among top 3 challenges businesses are facing – SME Barometer for Q4 2024

Issues with late payments has joined the top three concerns local businesses are facing, along with persistent employee shortages and unfair competition, the SME Barometer for the fourth quarter of 2024 showed.

The SME Chamber also urged government to ensure that policies tied with labour migration must reflect the country’s economic vision.

On Tuesday, the Chamber presented the Business Performance Survey for the year 2024, an online survey which compiled the unique submissions of 364 respondents, who are businesses operating in Malta.

President Paul Abela, Chief Operating Officer Andrew Aquilina and Deputy President Philip Fenech presented the findings of both the survey and the SME Barometer for Q4 of 2024.

The survey was conducted by the Chamber in the period of 10 January to 22 January of this year, and the margin of error was that of 5%.

Abela said that businesses’ largest concern remains employee shortages, and the SME Chamber is in discussions with Minister Byron Camilleri on the Labour Migration Policy, even suggesting some proposals.

The majority of businesses (52.7%) surveyed employ between one to nine employees (micro-businesses), followed by 28.2% of businesses who employ 10-49 employees. 15.8% of businesses employed over 50 employees, and 3.4% employ over 249 workers.

39% are in the retail, import, distribution and wholesale line of business, followed by 18% in the transport business, and 17% in the professional services and HR line of business, the survey showed.

When compared to the previous year (2023), businesses in 2024 said that their total turnover has generally remained the same (34%), while 42% said it has increased, and 24% said it decreased, Aquilina said.

In 2023, 26% of businesses said that their total turnover remained the same, while 46% had said that it increased. 28% of businesses in 2023 has said their turnover had declined, he said.

The main reasons businesses felt led to increase in sales in 2024 was increased brand presence/better marketing efforts (34%), followed by better sales strategies (30%), and the increase in price due to external factors (20%).

On the other hand, Aquilina said that the main reasons businesses felt led to the decrease of sales in 2024 was predominantly that the customer spending power has decreased (53%), followed by increased competition (48%) and inflation (26%). 23% of businesses also cited illicit trading and/or unfair competition.

On unfair competition, which remains in the top five business concerns, Abela said that the Malta-Sicily catamaran, for example, is not regulated enough, as people import Italian products without paying for the VAT, creating unfair competition for local importers.

2024 compared very similarly in terms of profitability with 2023, with the majority of businesses said that their profitability remained the same (41%). This was an increase from the previous year, where 34% said their profitability has remained the same.

Aquilina said that 31% of businesses were less profitable in 2024 compared to 2023 (40%). Meanwhile, the percentage of businesses who said their business was more profitable remained the same (26%).

The main causes for price increases remained employee wage and salary costs (63%), followed by the cost of products coming from abroad (54%). On this, Abela said that today’s situation has changed, and for a business to retain an employee, salaries are increased “automatically.”

Fenech also added that there has also been a large element of poaching between larger businesses and smaller, older ones.

During the festive period, respondents were asked how their business sales (turnover) fared when comparing the festive season to previous years.

Aquilina said that the majority, 46%, remained the same, while 30% of businesses said it has decreased, and 24% said it has increased.

The SME Barometer for Q4 of 2024 showed that the three most important issues businesses currently face remain employee shortages (44%), unfair competition (26%) and issues with late payments (23%), a concern which has recently cropped up more often among SMEs.

In fact, compared to the previous quarter of 2024 (Q3), the concern over delayed payments went up from 14% to 33%, the Barometer showed. It observed that delayed payments from clients or institutions negatively affect cash flow for businesses, particularly SMEs.

Abela pointed out that even government’s culture on late payments must stop, which increase issues of overtrading. Fenech commended the skills pass initiative to attract more quality workers but said that there is an element of delay to catch up with the demand.

The SME Barometer showed that the top three issues the country is facing, and that businesses want government to do something about is a lack of good governance (42%), followed by the level of corruption (40%) and overpopulation (27%), which has decreased from the previous quarter, but remains in the top three business concerns.

The SME Chamber observed that overpopulation, coupled with a lack of infrastructure to accommodate growth are impinging on citizens’ quality of life.

Aquilina said that the absolute majority of businesses still feel that the country is moving in the wrong direction, despite the decrease from the previous quarter (79% in Q3,2024, 72% in Q4).

Asked if they believe it is a good time to invest in the next 12 months, 27% responded with “no,” compared to the 31% in Q3.

The Barometer showed that the number of businesses who shifted their answer to “not sure,” has increased, with 61% in Q4 compared to 57% in Q3 of 2024.

Aquilina said that those who responded with “yes,” also increased, from 13% in Q3 to 17% in Q4, 2024.

Asked for their expectations for 2025, 57.1% of businesses expect that 2025 will be the same, while 23.9% said that 2025 will be better. 19% of respondents said that 2025 will actually be worse.

Respondents were asked to say which particular issues they would like the SME Chamber to address, with some citing that the excessive reliance on compliance increases costs.

Other issues businesses want addressed include labour shortages, attracting quality workers, good governance and less bureaucracy, public sector recruitment which is draining skilled employees, a lack of enforcement for non-compliance, and a need for the increase of support services to match the economy’s rapid growth.

Another issue is the accessibility to banking and bank charges, where Abela said that while the proposal of removing cash payments in the Labour Migration Policy is positive, government must find a solution for workers, especially foreign, to be able to open bank accounts.

Businesses also said that tax reduction for local businesses must be considered. Abela said that it is unacceptable for foreign companies to pay 5% tax, while Maltese companies have to pay 35%. “This is a large discrepancy, and we will continue advocating for it,” Abela said.

The SME Barometer made a number of observations, one of which was that the real cost of doing business in Malta is also increasing, with many respondents recording reasons of local nature as the main reason for price increase within their business.

The Chamber said that government needs to ensure that any decisions’ taken at political level do not lead to further inflation.

The SME Barometer recommended that government needs to seriously address issues of unfair competition, and strengthen transparency and anti-corruption measures to rebuild trust in public institutions.