SMEs in Singapore wary of expanding and investing, even as sentiment improves: Poll

SINGAPORE (THE BUSINESS TIMES) – Business sentiment among small and medium-sized enterprises (SMEs) in Singapore has eased off its record low, but firms are still expected to hold off expansion and capital investments for the first half of 2021.

That’s according to the Singapore Business Federation (SBF) and information service Experian’s latest quarterly poll, where 2,100 SMEs across six sectors were surveyed between Oct 6 and Nov 13.

The SBF-Experian SME Index for January to June 2021 rose to 48.2, up from the all-time low of 46.3 observed in the previous quarter. Readings below 50 signal contractionary sentiments.

Of the seven areas that the businesses were polled on, expectations towards turnover, profitability, access to financing, capacity utilisation and hiring improved over the last quarter.

However, their expectations of business expansion and capital investments weakened. The indicator for business expansion fell 0.79 per cent to 5.04, marking a new low, while that for capital investments decreased 0.6 per cent to 5.

At a reading of 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” for business sustainability in the immediate term, said SBF and Experian in a joint press statement on Tuesday (Dec 22).

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

James Gothard, general manager for South-east Asia credit services and strategy at Experian, noted that the gradual economic recovery from the Covid-19 pandemic has helped to ease SMEs’ negative expectations, but pointed out that it looks “uneven across the board”.

Across the six sectors – commerce and trading, construction and engineering, manufacturing, retail and food and beverage, business services, and transport and storage – negative sentiments eased.

But the commerce and trading sector showed the greatest improvement in sentiment; it is also the only sector with improved sentiments on all fronts. SBF and Experian said that this may be due to international trade volumes being expected to “recover better than initially expected by 2021 with the easing of restrictions”.

On the other hand, the business services sector lags 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.

Said Mr Ho: “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.”

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