Cypriot businesses will partially pass higher costs to consumers

6 in 10 businesses said that they will partially pass on increased costs to consumers

Cypriot businesses are expecting their turnover to suffer from the adverse effects of the war in Ukraine and the subsequent sanctions imposed on Russia, according to a set of surveys conducted by the Employers and Industrialists Federation (Oev).

The first survey took place between March 4 and March 15, with 188 participating businesses, while the second survey took place between April 7 and April 11, with 92 businesses taking part in it.

The survey questions aimed to address the concerns of companies that have business relations with Russia or Ukraine, across a number of sectors of economic activity.

Most affected businesses operate in the tourism sector, retail and wholesale trade, industry, construction and real estate, as well as financial services.

Among the key findings of the two surveys is the expectation that affected Cypriot businesses will see serious disruption in their operations, along with a significant hit to their turnover.

The percentage of businesses who said that their economic activities will be quite affected or very affected rose from 80.8 per cent in the first survey to a massive 91.3 per cent in the second survey.

Moreover, the percentage of businesses that expect a reduction in turnover rose from 63.8 per cent in the first survey to 73.9 per cent in the second one.

In the first survey, 19.2 per cent of businesses said they would not be affected to a great degree, with the percentage falling to 8.7 per cent in the second survey.

Conversely, things are somewhat more positive when it comes to the effects on employment numbers.

“Affected businesses whose estimate was that their staff would need to be reduced was 11.7 per cent after the first survey, while this percentage decreased to 8.7 per cent in the second survey,” the federation said in a statement.

“This shows that most companies are reacting calmly in relation to their full-time staff,” it added.

Things have also improved in terms of material and product supplies, with 30.4 per cent of businesses now saying that they are unable to secure the necessary items, a notable improvement from the percentage of 52.1 per cent of businesses who said the same after the first survey.

Regarding the ability to absorb rising costs, whether they are the result of increased inflation or relate to costs linked directly to Ukraine or Russia, as is the case with the agricultural sector, for example, things did not deviate significantly between the two surveys.

With participants being able to provide more than one answer, 5 in 10 businesses said that they would fully or partially absorb higher costs, while 6 in 10 businesses said they would fully or partially transfer it to the consumer.

Meanwhile, 2 in 10 businesses said that they would either suspend production for the time being or hold off on ordering new products or materials.

When asked about the main ramifications stemming from the war, with multiple answers being allowed, 73.9 per cent of businesses participating in the second survey said that they expect or are already experiencing higher retail prices, higher import prices, and higher charges for services offered.

In addition, 8.7 per cent said that they are experiencing difficulties when dealing with foreign banks, while 39.1 per cent said that there are now issues along their supply chain.

Regarding how much of each business’ turnover relates to each country, 40 per cent of businesses in the second survey said that less than 20 per cent of their turnover is connected to Russia, while 62.5 per cent of businesses said the same about Ukraine.

40 per cent of businesses’ said that between 20 and 60 per cent of their turnover is connected to Russia, while 30 per cent said the same about Ukraine.

Finally, about 1 in 5 businesses said that more than 60 per cent of their turnover is connected to Russia, while 12.5 per cent of businesses said the same about Ukraine.