The most recent PwC Malta’s Middle Market Barometer has gauged the preoccupations of what are arguably two of the economy’s hardest hit industries by the COVID-19 pandemic, the retail fashion and restaurant business. The barometer was carried out during last October, in which around 100 business units participated through call interviews and follows up on the June 2020 barometer.
In introducing the results, PwC Territory Senior Partner, David Valenzia, commented on how the current pandemic has exposed the fragility of particular industries. He stated that whilst Government support for industries under stress is vital at this juncture, the need for the innovation of business processes and economic diversification on a macro-level, are the key factors which should shape the strategic economic rebound plans for the medium and longer term.
Invariably all participants in the barometer reported a drop in business during the last six months. Outlook for the next six months is bleak, especially amongst restaurateurs. Only 5% of those interviewed hold a positive outlook. 30% anticipate a stable level of business, whilst the majority (64%) are braced for a sharp downturn in business. Retailers in the clothing business are marginally more upbeat, with 21% of those interviewed anticipating a recovery in business in the next six months. Nonetheless, the overwhelming majority, at 67%, emanate a negative outlook for the months which overlap with the festive period, traditionally an intense period for business. In our June 2020 barometer, the negative outlook feeling was more pronounced, at 87%. This could suggest that the economy is absorbing the favorable effect of the Government support measures and the anticipation for the approval of the vaccine, which should contain and eventually end the pandemic.
The restrictive measures of the past months have accelerated the investment in digital supply channels. In the June 2020 barometer, 59% have stated that current circumstances pushed new business initiatives on digital platforms. In this barometer, participants were interviewed about the return on investment of such new initiatives. An encouraging 71% of businesses which recalibrated processes to adapt to the new circumstances suggest that such initiatives were indeed positive. Retail fashion operators, at 76%, edge restaurant owners in commenting positively on the leap into digital markets. In a further signal of resilience, 69% of the total participants in the barometer indicate that further plans for investment in digital and innovative business initiative are in the pipeline. Owners of retail fashion outlets, at 92%, demonstrate the strongest resolve in reshaping the trajectory of their business distribution channels by further investment in digital platforms. It appears that the most common investment, across the board, was the enhancement of the digital presence of the business on the internet, through upgrades to the respective website’s functionalities and potential.
The current and anticipated drop in sales and clientele is the topmost concern which resonates from this barometer. 89% of business interviewed in this barometer indicated this when asked to list the causes of business apprehension. A scenario where the Government terminates the COVID-19 supports schemes emerges as an equally significant business concern. 58% of the participants could be mulling scaling down operations and making employees redundant if the current stressed level of business had to persist in the next months. Another business concern identified by 53% of the businesses is the maintenance of bank financing repayments, once moratoria expire.
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