• EY Cyprus releases the first EY Business Leaders’ Confidence Barometer that measures the market sentiment across key industries in Cyprus
• Executives are more confident about their companies and with confidence returning in their industry and the Cypriot economy 
• Hospitality and construction industries were hit hardest by the pandemic
• 43% of respondents have actually increased their headcount over the past year
• 57% report an increase in investment since the outbreak of the pandemic

EY Cyprus presents the first edition of the EY Business Leaders’ Confidence Barometer(the “Barometer”), a set of indicators that measure the market sentiment of senior executives across key industries in Cyprus. The aim is to identify trends in the way companies adapt to the changes in pandemic-induced restrictionsand gauge corporates’ confidence in the outlook of their industry and the broader economy. The survey focuses on four areas: market confidence, financial performance & strategies, workforce & staffing and investment appetite & funding accessibility.

The sample comprises a selection of industry senior executives, primarily focused on leaders of the biggest companies in Cyprus and covers the main sectors of the Cypriot economy including Financial Services (local banks, insurance companies, funds etc), Technology and Telecommunications (telecommunication providers, information technology companies, solution providers etc.), Hospitality, Real Estate & Construction (hotels, developers etc.) and Non-Food Retail (shopping malls, retailers of electronics, furniture retailers etc.).

At this point executives express higher confidence in their own companies than their sector and the broader Cypriot economy

Respondents were asked to rate the level of their confidence, on a 1-10 scale, in the domestic economy, their industry and their company. Interestingly, the highest confidence was observed with respect to their own company’s prospects (average score: 8.3), compared to the prevailing sentiment around the domestic economy (6.3) and their own industry (6.8). Most respondents stated that their company has remained resilient through the pandemic due to its solid financial position and strong reputation in the market.

The vaccine rollout and the government plans announced for the restart of the economy have resulted in a rise in confidence. However, uncertainty around the outlook persists due to concerns on the pace of the vaccination and the evolving virus mutations.

As was to be expected, levels of confidence vary significantly across sectors. The most concerned were the Hospitality, Real Estate and Construction industries, which were the most severely impacted by the pandemic. Executives from the non-food retail sector were overall the most optimistic, and from financial services were the most confident about the prospects of the domestic economy.

While all the respondents feel confident that the economy will improve over the following 12 months, views vary as to when it will be returning to the pre-pandemic levels. The majority anticipates the domestic economy to rebound in the medium term, with 65% expecting the recovery by mid-2023. One in four respondents (26%) are more optimistic, expecting a recovery within the next 12 months.

Wide disparities exist with regard to pandemic impact on companies’ financial performance

Executives were also asked about the impact of the pandemic on their companies’ financial performance and their expectations for the near future. As expected, the survey reveals the varied impact of the pandemic on companies’ financial performance. The majority of the respondents in the financial services and technology & telecommunications sectors reported stable or increased revenue over the last year, whereas, most of the respondents in the hospitality and construction industries recorded a sharp deterioration in their turnover. The retail sector faced a mixed impact with 50% of executives reporting a decrease while the other half experiencing a slight increase in revenue.

Moving forward, the executives across all industries under examination, appear to be optimistic on the prospects for their companies, anticipating an increase in their revenues. Notably, the Hospitality, Real Estate and Construction sectors, which were hit the hardest by the pandemic, expect strong rebound over the next year.

Remote working, digital transformation and sustainability have been identified as the most important trends transforming businesses 

Participants were also asked about the initiatives that they are currently undertaking in order to future-proof their businesses. All respondents outlined the need to support work flexibility through a hybrid work model and to develop appropriate monitoring and assessment tools.

Moreover, they highlighted the elevated need to bring forward their plans for digital transformation and transition to sustainability (two pre-existing mega-trends accelerated by the pandemic). To facilitate this adaptation, they also highlighted the need to reconfigure their workforce & workplace.

When asked what initiatives the Government should take, respondents stressed the need for continuous support to sectors affected by COVID-19 through more targeted incentives, for example VAT or Capital Gains Tax credits on real estate and promotion of more pervasive digitalisation across public and private sectors.

The pandemic has had a limited impact on companies’ headcount

With regard to companies’ headcount, the survey indicates that over the last year no significant decrease in the workforce occurred, which can be attributed to the salary and employment support measures provided to employers by the government. Interestingly, almost half of the respondents have even increased their workforce during the last year.

Employers are also optimistic about the workforce evolution in the future, with 61% of respondents anticipating a slight or substantial increase in their workforce.

At sectoral level, Technology and Telecommunications companies have increased their workforce, whereas financial services and hospitality/real estate companies are expecting to reduce their workforce.

Investment remains resilient in key sectors

Confirming the relatively positive economic outlook, most of the respondents are investing more now than prior to the outbreak of the pandemic, with only 17% reporting declining investment appetite.

However, there are large differences between the industries under examination. All Retail leaders reported increased investment appetite and needs, whereas, the majority of the executives stated that they have cut or postponed their investment plans come from the Hospitality, Real Estate and Construction sectors. Technology sector are split between those reporting increased investments and those seeing no change.

Respondents were also asked to evaluate their current ability to access different funding options. The survey outlines that most companies, irrespectively of their sector, are bank–dependent when it comes to their financing needs, with 87%of respondents reporting good access to bank financing. 57%of respondents asserted that they utilize alternative funding options such as intragroup funding, strategic equity investors, bond issuance etc., with an overall good access. Access to EU and government funds was found to be less easy.

Commenting on the findings of the EY Business Leaders’ Confidence Barometer, Stelios Demetriou, Partner, Head of Strategy and Transactions Services at EY Cyprus, stated:

“As the world emerges out of the wave of lockdowns and pandemic countermeasures, it is useful for policy and corporate decision-making to monitor forward-looking indicators that reflect economic developments as these happen. The sentiment from the EY Business Leaders’ Confidence Barometer is that the Cypriot economy is coming back! Executives are adjusting their business models to respond to the post-COVID environment.”

Alexandros Pericleous, Associate Partner, Strategy and Transactions Services at EY Cyprus, who led the analysis on the report, commented: “The EY Business Leaders’ Confidence Barometer shows that major Cypriot companies are weathering the storm, are optimistic about their near-term prospects, and continue to invest. Companies are also embracing the need to accelerate their digital transformation and transition to sustainability, while also reconfiguring their workforce and workplace.”