Business sentiment improves but SMEs still cautious: Poll

The mood has improved among small and medium-sized enterprises (SMEs), but companies are still expected to hold off expanding and investing capital in the first half of next year, a survey said yesterday.

The poll of 2,100 SMEs across six sectors between Oct 6 and Nov 13 was used to compile the latest index for the Singapore Business Federation (SBF) and information service Experian.

The index for January to June next year rose to 48.2, up from the all-time low of 46.3 in the third quarter of this year. Readings below 50 signal contractionary sentiment.

Expectations towards turnover, profitability, access to financing, capacity utilisation and hiring improved over the third quarter.

But the likelihood of business expansion and capital investment weakened. The indicator for business expansion fell 0.79 per cent to 5.04, a new low; capital investments decreased 0.6 per cent to 5.

SMEs are expecting to hold back from any increase in capital investments over the next six months, as they seek to “better manage cash flow and stretch current funds”, said SBF and Experian in a joint statement yesterday.

SBF chief executive Ho Meng Kit said the uncertain business climate continues to weigh on the confidence of SMEs, even though recent announcements on Singapore’s phase three reopening and availability of Covid-19 vaccines “bode well for recovery and growth”.

Mr James Gothard, general manager for South-east Asia credit services and strategy at Experian, said the gradual economic recovery from the pandemic has helped ease SMEs’ negative expectations, but it looks “uneven across the board”.

Negative sentiment eased across the six sectors – commerce and trading; construction and engineering; manufacturing; retail and food and beverage; business services; and transport and storage.

Commerce and trading saw the greatest improvement in sentiment and was the only sector with improved sentiment on all fronts. The SBF and Experian said this may be due to international trade volumes being predicted to “recover better than initially expected by 2021” with easing of restrictions.

The business services sector lagged behind the others in terms of improvements in expectations towards the overall outlook and profitability for the next six months. It is also the only sector with poorer turnover expectations.

Mr Ho said: “We urge SMEs to pay particular attention to their financial management as revenue sources are still challenged while government support (measures) are expected to be gradually wound down next year. They should continue with their business transformation efforts, always looking for opportunities to thrive and build resilience in a fast-changing environment.”

THE BUSINESS TIMES

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