Business pessimism extends to employment: 24% will reduce their workforce before the end of the year
Companies face a tough final quarter of the year with confidence about the progress of their businesses still on the floor. Although the perspectives improve somewhat compared to those that were glimpsed for the summer months – just after the first State of Alarm -, only a 8.1% believe that business progress will be favorable between October and December. The data only improves by four tenths compared to the third quarter (7.7%).
However, the confidence goes by neighborhoods and by size. Large companies with more than 1,000 employees have the highest upturn of optimism before a return to economic normality and the potential achievement of European funds to boost its income statement. Small companies with fewer than 10 workers and most vulnerable to the crisis are the most pessimistic about the performance of their businesses.
To prepare its business confidence index, the National Institute of Statistics (INE) asks 8,000 establishments about the forecast in the progress of their business for the next three months. There are three possible answers: favorable, normal, or unfavorable. The balance of expectations is drawn by subtracting the unfavorable responses (pessimistic state) from the favorable ones (optimistic).
Well, that balance shows for the last quarter of the year a negative balance of 41 points. The figure is six points better than that of the previous period because the pessimistic responses are reduced, although the optimistic ones remain stagnant. The gap by size is enormous: in the case of the largest groups the negative balance is 23 points, while in those with less than 10 it is 52 points.
The level of trust also varies greatly depending on the sector. While sectors such as industry and construction return to carburetting, the hotel industry continues to be gripped by the return of capacity and hour restrictions to contain the new advance of the health pandemic. 69% of the establishments in this sector foresee an unfavorable last quarter.
Business confidence is a key indicator to know and forecast the performance of an economy. Without trust, companies are dedicated to mere survival and dodge any idea of investment in growth or transformation. The levels of uncertainty reflected by the INE confirm this negative state of mind and explain that, for example, there is no demand to access the ICO Investment guarantee line set up by the government so that companies can transform themselves.
This indicator also has a clear link to employment. Only 6% of the companies surveyed say they will increase their hiring between October and December, while 24% acknowledge that they will have to face staff adjustments. The figure includes layoffs and non-renewal of workers with temporary contracts.
By territory, the regions most exposed to tourism continue to register the worst levels of business confidence. In the case of the Canary Islands, the negative balance is 48 points, while in the Balearic Islands it exceeds 58. The national average is -38 points, with driving regions such as Madrid with a higher level of pessimism than in the rest of the country. The region, immersed since last Friday in a second chapter of the State of Alarm, is once again the one hardest hit by the virus.