One in five Cypriot firms (21 per cent) expect a permanent reduction in their staff levels because of the Covid-19 pandemic, with the figure rising to one in three businesses in the service sector (35 per cent), according to the annual European Investment Bank Investment Survey (EIBIS).
Moreover, one in two Cypriot firms (51 per cent) will invest less than initially planned in the current financial year, slightly more than the 45 per cent average for the EU27.
The survey shows that firms in Cyprus are much less optimistic about the overall economic climate compared to EIBIS 2019 (-68 per cent versus +6 per cent respectively) compared with the EU figure of -56 per cent.
The proportion of firms in Cyprus citing long terms barriers to their investment activities is also higher than the EU average on almost every measure, the report shows.
It says that availability of skilled staff (89 per cent) is perceived as a barrier by an increasing number of firms, up eight percentage points on EIBIS 2019. Whilst availability of finance (61 per cent) is now perceived much less of a barrier than in EIBIS 2019 (73 per cent) but remains well above the EU average (48 per cent).
“The most frequently cited long-term impact of Covid-19 is expected to be the increased use of digital technologies (55 per cent), especially among firms in services (63 per cent). Manufacturing firms are the least likely to cite this as a long-term impact (29 per cent). Just under a half of firms in Cyprus (47 per cent) expect changes to their service or product portfolio, with consistent reported levels across the sectors and by size of firm,” the report said.
And it added: “One in five firms (21 per cent) expect a permanent reduction in employment levels, increasing to almost one in three within the services sector (35 per cent).”
Around three in ten (29 per cent) firms, with investment plans for the current financial year, plan to abandon or delay at least some of their investments.
Nine in ten firms in Cyprus (90 per cent) report generating a profit in the last financial year 2019, broadly in line with EIBIS 2019 (83 per cent) but above the EU average (80 per cent).
Firms that were using external finance in 2019 are on balance satisfied with the amount, cost, maturity, collateral and type of finance received. The highest levels of dissatisfaction recorded among firms in Cyprus is with the collateral requirements (7 per cent). One in ten firms in Cyprus (10 per cent) could be considered as external finance constrained in 2019, above the EU average (6 per cent).
The share of firms that have invested in measures to improve their energy efficiency (38 per cent) is in line with EIBIS 2019 (42 per cent) but is below the EU average (47 per cent).
Almost one quarter of firms (24 per cent) feel their business has been majorly impacted by climate change and the related changes in weather patterns, and a further two in five (41 per cent) report a minor impact. These levels are in line with the EU average (23 per cent and 35 per cent respectively).
Firms in Cyprus are expecting the transition towards a low-carbon economy to be positive for their reputation (+16 per cent), but to have a negative impact on their supply chain (-6 per cent) and market demand (-12 per cent) in the next five years. Just over half of all firms in Cyprus (53 per cent) have already invested or plan to invest in the next three years in measures to tackle the impact of weather events and reduction in carbon emissions. This is below the EU average (67 per cent).