The 2026 Balearics Outlook report from consultants KPMG indicates that insularity remains the main challenge facing businesses on the islands. But the report has inevitably had to factor in the consequences of the conflict in the Middle East, a quarter of businesses surveyed saying they have already redefined strategies and another ten per cent pointing out that they are in the process of doing so.
Even those businesses not geared to international operations are having to take account of geopolitical factors. Only five per cent of all businesses are not considering taking some action or other.
More than 80% believe the Balearic economy will remain the same or improve over the course of 2026. However, the conflict and how long it drags on will be key in potentially altering this cautiously positive outlook.
The report emphasises that the geopolitical environment, sustainability, regulation, and changes in consumer habits are reshaping business strategies and expanding the agenda of priorities, especially in terms of investment, internationalisation, and digital transformation.
Overall, 86% of businesses rate their situation as good or excellent, which is above the national average of 78%. On the economy, only a quarter anticipate a downturn, reflecting an optimism that is higher than the national average.
A half of all businesses plan expansions of their workforces, although a key issue for almost 75% of the businesses continues to be attracting and retaining talent. Problems with recruitment and staff shortages have dogged Balearic businesses in various sectors, hospitality for instance, for several years.
As to the islands' main economic sector, tourism, over 80% of businesses anticipate that this will remain stable, the caveat being the potential impact of the conflict.