A Barometer of Innovation and Resilience

In brief

The newly released EY Entrepreneurship Barometer Survey – Cyprus 2025 provides a comprehensive look into the attitudes, priorities, and challenges faced by local entrepreneurs. Surveying 32 Cyprus-based business leaders, the report offers directional insights into innovation trends, workforce dynamics, investment strategies, and long-term planning.

The responses shed light on emerging trends that could define Cyprus’ entrepreneurial future. The findings paint a picture of a resilient and forward-thinking business environment—one that is increasingly digital, cautiously optimistic, but not without its growing pains.

Key Findings at a Glance

• 56% of Cypriot businesses prioritize product innovation, placing Cyprus ahead of the broader CESA (South-eastern Europe & Central Asia) region (53%).
• Only 28% engage in process innovation, far below CESA’s 46%.
• 53% plan to invest in IT systems, reflecting strong digital transformation momentum.
• 63% plan to hire full-time staff, indicating confidence in near-term growth.
• 75% rely on own funds or reinvested profits, highlighting a funding gap.
• 56% of businesses have not invested in AI, yet 79% anticipate AI will enhance efficiency.
• Only 10% of family businesses have a formal succession plan—a notable vulnerability.

A Closer Look at Innovation Trends

Cypriot entrepreneurs appear committed to staying competitive by focusing on product development and digital adoption. The country’s businesses outperform regional peers in Internet of Things (IoT) integration (56% vs. CESA’s 38%) and video conferencing adoption (66% vs. 55%).

There is also strong momentum in online marketing, cloud computing, and automation, signaling a shift toward more agile and customer-centric operations. However, process innovation remains underdeveloped. Just 28% of Cyprus respondents reported improvements in areas like production, logistics, or service delivery—a gap that could undermine long-term efficiency.

Organizational innovation (41%) and marketing strategy adaptation (38%) are gaining traction, but 9% of businesses still report no innovative activities planned—a missed opportunity in today’s fast-moving economy.

Investment and Financial Outlook

When asked about future investments, Cypriot businesses show strong interest in upgrading equipment (47%) and process automation (53%), reinforcing the trend toward modernization. Despite this, 38% cited lack of available funds as a barrier to investment—a concern that’s especially pressing for growth-stage companies.

While Cyprus fares better than the CESA average in terms of perceived economic risk, the heavy reliance on internal funding (75% vs. 65% in CESA) may limit scalability and innovation.

The Workforce Equation

The report reveals a positive hiring outlook among Cypriot businesses, with 63% planning to bring on new full-time staff—well above the regional average. There’s also growing interest in flexible models, with 34% planning to hire external collaborators like freelancers.

But recruitment challenges remain. 38% of respondents struggle to attract enough applicants, and 25% say they can’t compete with larger firms on compensation. Interestingly, only 16% report challenges sourcing local candidates, suggesting that the talent exists, but matching skills to roles—and offering attractive packages—remains a barrier.

Beyond hiring, employee engagement and culture are areas of concern for 38% of businesses. On a more positive note, only 9% cite difficulties adapting to hybrid work models, indicating solid organizational resilience.

AI Adoption: Belief in Impact, Hesitancy in Investment

Artificial intelligence (AI) is seen as a future game-changer by most respondents, with 79% expecting it to boost operational efficiency and 71% believing it will reduce errors and improve quality. Yet, more than half of Cypriot businesses (56%) have not yet invested in AI, indicating a disconnect between perceived potential and action.

Among those who have invested, popular applications include:

• Data analytics (71%)
• Process automation (57%)
• Customer support (50%)
• Employee development (43%)

Concerns about lack of customization (29%) highlight the need for tailored solutions that meet local business needs.

A Cyprus-Specific Perspective

The Cypriot entrepreneurial ecosystem has shown promising signs of maturity. With policies such as the Startup Visa, IP Box regime, and various tax incentives, the government has laid a foundation for innovation and growth.

However, the survey surfaces uniquely Cypriot issues that need addressing:

• Succession planning is underdeveloped, with 52% of family businesses yet to address it and only 10% having a formal plan.
• Legacy and continuity matter, as 44% of respondents favor passing their business down through family inheritance.
• Despite economic headwinds, Cypriot businesses show more optimism than peers: 34% describe the entrepreneurial environment as favorable, compared to just 24% in CESA.
• Regulatory concerns are relatively muted, with 28% saying local regulations don’t hinder innovation—a more positive sentiment than the regional average.