Two firms have announced in the last week that they are to close. Firstly, the Menorcan branch of the Mallorcan company Socías y Rosselló which opened in Ciutadella in 1985 and will result in the loss of some fifteen jobs. The company were suppliers of electrical equipment, lighting, tools, industrial, building and plumbing equipment and domestic appliances. Secondly, another firm in Ciutadella, the shoe manufacturers Jaime Pons Sintes SL has been forced into closure leaving 16 workers without jobs. The company, which makes Roseta shoes, was forced to declare bankruptcy after a customer defaulted on payment. This is the fourth local shoe manufacturer to go out of business, the others being the Alaior firms of Zapatillas Alaior and Gomila Melià and the Ciutadella-based Creaciones Freehand, leaving around one hundred workers without a job in a trade that was one of the mainstays of the Menorcan economy.
In 2008 a total of 253 companies in Menorca stopped trading, 6.6% of the total number that had been in business the previous year, with a loss of 1,874 jobs (8.7% of the total number of workers). The figures are higher than the averages for the Balearic Islands which showed a drop of 5.1% in the number of active firms and 6.6% in workers. The number of self-employed people in the Balearics dropped from 85,434 in 2007 to 83,971 last year, a negative variation of 1.7%.
With other sectors also facing uncertain times, the construction industry has warned that if it does not receive an injection of capital soon, then some firms will shortly be forced to close. The lack of liquidity is so severe that, in some cases, workers have not been paid for several months and there have been instances of company owners mortgaging their homes in order to settle pressing debts.
According to Nicolau Bosch, the President of the Association for Construction Companies and Promoters, one of the problems facing the sector is the delay in receiving payment from the authorities, particularly the Balearic Government and Town Councils. Referring to the State Fund for Local Investment, the association's Vice-president, Carlos Sintes, acknowledged the speed with which local Councils had prepared and submitted projects and expressed his hope that the fund would be "a breath of fresh air for those companies awarded a project". However, he added the rider that if the construction companies were not paid quickly, then the fund's intention of creating more jobs might not be fulfilled. The State Government has announced that 70% of the budget for each project will be paid to the Councils once the contract has been awarded and this money needs to be passed on to the construction companies as soon as possible, according to Sintes.
The other problem crippling the construction sector is the credit shortage, despite the millions made available by the Balearic Government to banks for loans. Sintes feels that there may be individuals who wish to have work done but "they do not do so because they cannot find any bank which will give them credit".
The year 2008 was the worst year for Menorca's architects since records were first kept in their field; with a drop of 73% being registered in the number of homes authorised, a drop of 41.4% in the cost of projects and a 49% decrease in the volume of construction. The downturn in housing projects applies to both private homes and state-subsidised housing. Even the number of projects for alterations or extensions fell, although to a lesser degree, in this case 6.7%.
The president of architects in Menorca, Llorenç Seguí, attributes the dramatic drop not only to the world crisis and the resulting banking restrictions but also to excesses in the property sector in recent years. He explains that the price of land has increased by ten times in the last decade and the cost of housing has risen so sharply that the situation was bound to result in a crisis.
During the construction boom, workers became used to working more than the basic forty hours per week, thus substantially increasing their wages, the overtime payments being hidden as a form of bonus. In the current climate, one of the first cutbacks made by companies in order to avoid dismissals, is to "reduce" the working week to the basic forty hours, thereby also reducing the workers' pay. Other measures adopted by firms in order to stay afloat include putting employees on non-permanent contracts or arranging that they work for nine months and then claim unemployment benefit for three.
It was announced last week that the Spanish economy was in recession after negative growth had been recorded for two successive quarters.
However, the Balearic Government is confident that the same fate will not overtake the islands during this year and that the year end will see a growth of 0.8% in the region's economy.
State fund creates 525 jobs
Despite the limited time available, the island's Town Councils managed to submit a total of 79 projects for financing through the State Fund, accounting for 99.7% of the total sum of 15.9 million euros allocated to Menorca.
A total of 525 jobs will be created around the island to carry out the various projects. In Alaior 67 people will be employed on the 17 schemes presented with a total value of 1.58 million euros. Es Castell's two projects, at 1.35 million, will provide jobs for 51 workers. Ciutadella is still waiting for one of its proposals to be accepted but in total the 14 projects, with a 4.9 million euro cost, will require 127 workers. Maó's 17 projects, with a budget of just over 5 million, will provide employment for 105 people, while 20 people will be employed in Ferreries on 4 schemes valued at around 800,000 euros. Some 43 people will work on Es Mercadal's 11 proposals costing 856,000 euros and Es Migjorn's two plans of action (267,000 euros) will need 11 workers. Sant Lluís submitted 12 schemes for 1.1 million euros which will provide 101 jobs.