Survey forecasts further job cuts in 2010

In December 2009, the Cyprus Employers’ and Industrialists’ Federation (OEB) published the findings of a survey on the problems facing the business world as a result of the global economic crisis. The survey also looked at members’ intentions regarding staff cutbacks. In this context, 33% of OEB members report that they will dismiss employees in 2010, which would increase the unemployment level from 5.9% to about 6.6%.

On 10 December 2009, the Employers’ and Industrialists’ Federation (Ομοσπονδία Εργοδοτών και Βιομηχάνων, OEB) published the findings of a survey on the problems faced by Cypriot enterprises as a result of the global financial crisis. The survey also examined enterprises’ intentions in terms of implementing staff cutbacks. Taking part in the survey were OEB member companies operating in four sectors of economic activity at national level – manufacturing, services, wholesale and retail trade, and construction. The survey was carried out between 6 and 20 October 2009.

Main problems

Regarding the challenges faced by Cypriot enterprises in the context of the global economic crisis, the high cost of borrowing and lack of liquidity are cited as the most significant factors in all sectors of economic activity under consideration – at 44.3% and 40% respectively. The next most significant factor is unsatisfactory collaboration with government services and the high cost of electricity, both cited by 38.2% of the respondents. Other serious problems include increased credit, a decrease in sales, low return on capital and more bad debts.

Staff cutbacks

In terms of companies’ intention to dismiss employees, 33% of the enterprises taking part in the survey stated that they would be introducing staff cuts during 2010, compared with 23% in January 2009. This proportion is even higher in three of the four sectors of economic activity under consideration: at 40% in construction, 44% in manufacturing and 47% in wholesale and retail trade. With regard to the construction sector in particular, only 5% of the companies anticipate engaging new staff. This figure is lower than in all of the other sectors, confirming the decrease in construction work. In this context, according to OEB’s predictions, unemployment will rise over the coming months to reach 6.6%. It should be noted that – according to the latest seasonally adjusted Eurostat data, published on 8 January 2010 – although Cyprus continues to have the fourth lowest unemployment rate in the EU27 (6.2% in November 2009), there has been a substantial increase since November 2008, when the unemployment rate was 3.7%.

Proposed measures to address the crisis

Based on the survey’s findings, the companies’ recommendations for measures to be taken to address the economic crisis include the following:

• implementing changes in the operation of government services so that they operate in parallel with the private sector;

• providing for a longer period for the payment of value-added tax (VAT);

• reducing the size of the state/public sector;

• introducing faster procedures for evaluating applications for government grants;

• increasing pressure on the Electricity Authority of Cyprus to reduce the cost of electricity;

• encouraging companies to build up liquidity;

• introducing faster procedures for issuing licences and real estate deeds.

Eva Soumeli, Cyprus Institute of Labour (INEK/PEO)