Source: cyprus-mail.com
The Middle East crisis has sharply weakened confidence among Limassol businesses, pushing energy costs, weaker sales and economic uncertainty higher up their list of concerns, even as companies continue to invest and longstanding problems including labour shortages, bureaucracy and delays in justice persist.
The findings come from the Spring/Summer 2026 Limassol Chamber Business Barometer, the 18th edition of the survey carried out by the Limassol Chamber of Commerce and Industry (Evel), which examines the concerns, expectations and investment plans of businesses in the district.
The survey ran from April 30 to June 9 and received 67 responses, down 15 per cent from autumn 2025 and the third-lowest participation since the Barometer was launched in 2016. The Chamber therefore cautioned that the smaller sample, particularly within individual sectors, limits the extent to which wider conclusions can be drawn.
Nevertheless, the shift in business sentiment was clear.
The shortage of skilled labour remained the most frequently cited problem, accounting for 17.8 per cent of responses, although its share fell from 22.5 per cent six months earlier. Difficulties involving government departments followed at 16.1 per cent, while concern over high labour costs climbed sharply to 13.3 per cent, from 7.9 per cent in autumn 2025.
At the same time, weaker demand has become harder to ignore. Low or declining sales were cited by 10 per cent of respondents, up from 6.2 per cent six months earlier and reaching double digits for the first time in the period examined by the latest survey. Delays in the delivery of justice also became more prominent, rising to 8.9 per cent from 6.7 per cent.
The Chamber linked some of that deterioration to the renewed Middle East crisis, which coincided with the survey period and heightened concerns over energy, commodity prices and the wider economic outlook.
Indeed, the proportion of businesses saying the energy sector affected their operations and competitiveness to a very high degree jumped to 20.9 per cent, from just 7.7 per cent in autumn 2025. A further 23.9 per cent reported a high impact, meaning almost 45 per cent of respondents were feeling significant pressure from energy.
That greater focus on immediate operating pressures appears to have been accompanied by a weakening emphasis on longer-term environmental considerations.
Only 28.1 per cent of respondents said environmental factors and Europe’s 2050 climate-neutrality target influenced their business decisions to a high or very high degree, down from 32 per cent in autumn 2025 and more than 38 per cent a year earlier. The Chamber said changing priorities following the Middle East crisis could partly explain the decline.
Use of sustainable mobility also remains limited. While the share of businesses saying they did not use solutions such as electric vehicles, public transport or charging infrastructure fell to 37.3 per cent from 51.3 per cent in autumn, another 29.8 per cent said they used them only to a limited extent. Just 9 per cent reported using such solutions to a high or very high degree.
Meanwhile, businesses rated their knowledge of environmental, social and governance requirements at an average 5.55 out of ten, up slightly from 5.39 in autumn but below the 5.82 recorded a year earlier.
More importantly, the Chamber found that companies with little or no preparation for ESG requirements still considerably outnumber those at an advanced stage, pointing to a continuing gap between awareness and implementation.
Compliance is proving another source of pressure.
Sanctions and trade restrictions were identified as having the greatest impact on company operations by 21.5 per cent of respondents, followed closely by health and safety regulations at 20.7 per cent and environmental or ESG compliance at 18.2 per cent.
However, the difficulty is not confined to the rules themselves. Asked what made it harder to remain informed and compliant, 42.8 per cent pointed to excessive bureaucracy, up from 37.5 per cent in autumn. A lack of time to monitor regulatory changes followed at 20.9 per cent, while 12.4 per cent said they did not know where to find the right information.
That frustration with bureaucracy runs throughout the report.
Respondents complained of slow licensing and communication with public authorities, while businesses also raised concerns over lengthy court proceedings and difficulties recovering debts.
Those concerns later emerged even more strongly when businesses were asked what government could do to improve the operating environment.
With tax-related options removed from the latest survey following the implementation of the tax reform, cutting costs and red tape became the clear first choice, attracting 25 per cent of responses, roughly double its share six months earlier.
Reducing VAT followed at 12.5 per cent, while investment incentives, greater public spending on infrastructure and clearer and more consistent policies each received 9.4 per cent.
The tax reform itself, however, received a comparatively favourable response. Businesses gave it an average rating of 6.86 out of ten, which the Chamber described as showing a satisfactory degree of approval among the Limassol business community.
Despite the more difficult backdrop, companies have not stopped recruiting.
A majority of respondents still planned to take on staff during the following three months, although the Chamber noted that recruitment intentions had been declining steadily over the previous year, pointing to greater caution.
Demand covered a broad range of skills. Companies reported plans to recruit office and sales staff, engineers, technicians, accountants, IT specialists, scientists, drivers and construction workers, as well as both skilled and unskilled production workers.
Among the responses were vacancies for data-centre engineers, CNC operators, metalworkers, electrical and mechanical engineers, welders, nurses, occupational therapists and doctors.
Investment intentions were more resilient.
Some 51.6 per cent of companies said they planned to invest during the following three months, reversing the position in autumn 2025, when fewer than half had intended to do so.
Nevertheless, uncertainty is clearly affecting those holding back. Among companies not planning fresh investment, 41.7 per cent cited uncertainty over the economic outlook, up sharply from 23.2 per cent six months earlier and 32.4 per cent in spring 2025.
Planned spending ranged from buildings and manufacturing equipment to computers, software, transport equipment and energy-saving measures.
Software was among the more common areas of investment, cited by 12 respondents, while 13 planned spending on buildings and 11 on computer equipment. Another five intended to invest in renewable energy and five in energy-saving measures.
Companies were also broadly satisfied with investments already made. Just over 54 per cent said they were fairly or very satisfied with returns over the previous 12 months, although that was below the levels recorded in both autumn and spring 2025. At the same time, outright dissatisfaction remained very low.
Where the deterioration becomes much clearer is in expectations for sales.
Only 15.1 per cent expected domestic sales to increase, down from 22.1 per cent in autumn and 25.7 per cent a year earlier, while 12.1 per cent expected a decline.
Expectations abroad were more mixed. Some 22.5 per cent expected overseas sales to rise, but an equal 22.5 per cent expected them to fall.
Taken together, just 12.5 per cent expected overall sales to increase, compared with 30.8 per cent six months earlier and one third in spring 2025. Another 12.5 per cent expected a decline, while more than two thirds expected little change.
Exporters were similarly more cautious. Excluding businesses that do not export, 36.4 per cent said confidence in export markets had decreased, compared with 22.2 per cent in autumn and only 6.4 per cent a year earlier.
Only 15.1 per cent reported greater confidence in export markets, leaving almost half saying conditions were broadly unchanged.
Rising costs were rated the biggest immediate risk for businesses, scoring an average 6.35 out of ten, the highest level recorded over the latest 12-month comparison.
Domestic competition followed at 5.17, while overseas competition stood at 4.72 and lack of domestic demand at 4.40. Labour unrest, by contrast, was seen as a comparatively limited risk, with an average score of 3.12.
Even as companies become more cautious, however, their appetite for technology appears to be strengthening.
Asked what would help companies increase innovation, investment in artificial intelligence tools emerged as the leading response, accounting for 19.4 per cent, ahead of investment in digital transformation at 16.4 per cent.
Collaboration with universities and research organisations followed at 13.9 per cent, while simplifying funding procedures attracted 13.3 per cent. Building technology parks and receiving government help to identify overseas partners each accounted for 12.7 per cent.
It is against this mixture of investment appetite and short-term anxiety that the sharp deterioration in economic confidence becomes particularly significant.
Only 12.1 per cent of businesses said their confidence in the outlook for the Cyprus economy had increased during the previous three months, while 25.8 per cent said it had fallen.
Six months earlier, the corresponding figures had been 16.4 per cent and 12.6 per cent.
As a result, the Chamber’s ratio between respondents reporting higher confidence and those reporting lower confidence dropped to 0.47, from 1.30 in autumn 2025.
The Chamber attributed much of the reversal to the geopolitical environment.
Businesses gave the Middle East crisis an influence rating of 7.31 out of ten, up from 5.49 in autumn 2025, making it the strongest of the external factors considered.
Rising commodity prices followed at 6.71, while the Russia-Ukraine war scored 6.05. By contrast, concerns over protectionism and trade frictions eased to 4.17, while the perceived risk of another banking crisis also declined.
The effect of the Middle East crisis was not considered uniform across the economy.
Tourism was viewed as by far the most exposed sector, with an impact rating of 7.59 out of ten, reflecting what the Chamber described as the industry’s particular vulnerability to external shocks.
The wider national economy scored 6.74, while manufacturing stood at 6.13 and local commerce at 6.03. Construction received 5.78, exports 5.69, other services 5.41 and financial services 5.32.
High technology, meanwhile, was seen as much less vulnerable, receiving the lowest score at 4.63.
The picture also differs considerably between Limassol’s three main business groupings.
For manufacturing, the shortage of skilled workers remained the dominant problem, accounting for 27.8 per cent of responses, followed by high labour costs at 18.5 per cent and difficulties with government departments at 13 per cent.
For commerce, however, weakening demand has become the greater concern. Declining sales moved into first place at 17.8 per cent, compared with just 5.5 per cent six months earlier, while government departments followed at 15.6 per cent.
Services presented a somewhat firmer picture, although the report cautioned that participation from that sector was particularly small. Government departments remained its largest concern, while the sector showed stronger recruitment and sales expectations than either manufacturing or commerce.
Indeed, 75 per cent of services businesses planned to recruit, compared with 60 per cent in manufacturing and 44 per cent in commerce.
Services companies were also more likely to expect higher sales and improved confidence in the wider economy, while commerce recorded the weakest confidence reading of the three sectors.
What links all three, however, is concern over costs.
The final conclusions of the Barometer identify rising costs as the common threat across manufacturing, commerce and services, alongside the Middle East crisis, high commodity prices and the continuing effects of the Russia-Ukraine war.
There were also more local frustrations. Some respondents complained about the quality of life and cleanliness of Limassol, rising waste collection charges and difficulties dealing with banks. One company active in defence and dual-use technology described business banking as its most serious obstacle, while another called for upcoming rules on the energy upgrading of buildings to avoid imposing excessive costs.