The ongoing conflict in Ukraine, a tense geopolitical climate, and rising inflation are squeezing company finances across regions. Increases in energy and raw material costs cut profits sharply, forcing many businesses to raise prices. Industries with high electricity use, such as metal processing and certain textile segments, have borne the heaviest burden from these shifts.
Supply and demand imbalances created during the Covid era have transformed into a sustained surge in energy, raw materials, and transport costs. This upward trajectory persisted through 2022 and intensified after the Russian invasion of Ukraine. Inflation has surged in the Alicante province, underscoring the broader economic squeeze and its impact on corporate profitability and planning. The spiral shows no clear end and is delivering serious consequences for local firms.
Among the sectors most affected is metal, a sector known for its intense energy needs. Luis RodrÍguez, president of the Metal Entrepreneurs Federation of the Alicante region, notes that commercial margins have been dramatically compressed by rising costs, especially energy, though input costs and labor also contribute. In many cases, profits have fallen by as much as 80 percent or more.
With costs climbing, many firms have little choice but to pass higher costs onto customers. At the outset, firms resisted shifts but renegotiations in ongoing contracts now reflect the new economic reality. Acknowledging the challenge, one executive emphasized that the response depended on existing contractual terms and the need to adapt to current conditions.
Textile industries, particularly the finishing sub sector and other electricity-intensive segments, have also weathered severe inflationary pressure. Some companies faced temporary workforce adjustments as they navigated cost pressures. Pepe Serna, president of Ateval the textile association, described a very complex period following pandemic recovery, a situation further complicated by the war and its knock-on effects.
In contrast, products like footwear have experienced a somewhat more moderate impact. Industry leaders explain that margins were trimmed in recent months and many firms now face unsustainable price levels that require careful review of pricing strategies and cost management.
Seasonality has helped some segments, such as toys, ride out the immediate cost spike in the first quarter with more stable production later on. However, producers warn that the path ahead remains uncertain and price rises will continue to shape commercial decisions. Industry executives stress that higher costs and less predictable demand will influence margins and competitiveness in the near term.
A regional study by a consulting firm indicates that roughly seven of ten business owners expect to raise product prices in response to inflation in the Valencian Community and Alicante, with observed price adjustments outpacing last year by a notable margin.
The current surge in energy costs stands out as the foremost short term hurdle for industrial firms and a major limiter of growth capacity. A pulse check from a leading consultancy shows that a large majority of employers anticipate energy costs as a decisive factor in business performance. In response, many firms are accelerating efforts to expand international trade. Although export growth was modest at the start of the previous year, the momentum has shifted, with more companies looking abroad for new markets and opportunities.
Alongside export plans, many firms are directing funds into digital transformation and cybersecurity. The same industry survey reveals a strong interest in upgrading technology and protecting digital assets as part of building resilience against ongoing economic volatility.