Worsening environment squeezes trading margins
Initial results from the Chamber’s 2005 Trading Conditions Survey indicate optimism in some sectors of the economy, though both the retail and wholesale sector take a bleaker view of prospects. The survey was sent out in January as the Chamber wanted to poll its members on conditions across the whole of 2005.

Responses to date have been high and all sectors have been well represented. The response rate so far has been 30 per cent, although some later submissions are expected. It will take some time to analyse all the results but the headline results are already in.

On the business outlook for the next 12 months, respondents were broadly favourable, believing that trading conditions are likely to remain the same or be an improvement on 2005 (see chart). Respondents in the finance sector were most optimistic about the outlook, with bankers being the most bullish about the year ahead. Those in the insurance sector were also pretty positive. The Rock’s property sector is likely to take heart from the optimistic responses from the construction sector. Respondents operating in this sector were split evenly, but believed that the prospects for the year ahead would remain the same as 2005 or see an improvement.

Tough trading for retailers and wholesalers
Views among Gibraltar’s retailers and wholesalers were less cheerful. The survey received responses from many operators across these two sectors. Responses from individual retailers or individual wholesalers have been collated separately from those firms operating in both. What is noticeable among these two interlinked sectors is that the majority of the respondents believe that 2006 will be the same or worse than 2005. We know from anecdotal evidence that last year was a tough one for retailers in Gibraltar. A relatively small proportion – less than a fifth of those retailers responding – thought that this year would be better than last.

This continues a theme from the previous surveys, although the increase in costs on all businesses last year coupled with a worsening trading environment has squeezed margins in these two sectors more than others. Competition in this sector, particularly from across the frontier, means that retailers cannot pass on these cost increases as easily as other sectors.

Longer term outlook
When respondents were asked about how they thought trading would be beyond 2006 there is perhaps greater cause for concern. Retailers and wholesalers are broadly pessimistic about the longer-term prospects for their sector. Only those in the finance sector - bankers and insurance, the construction sector and the legal sector are optimistic about the future of their business. It is notable that the hotel and catering sector sees poorer prospects beyond 2006 and it is perhaps surprising given that hotels have seen occupancy levels continue to rise in recent years.