SME survey shows Singapore firms having lowest profit expectations in 7 years

SMEs in Singapore are not feeling optimistic about their profitability over the next six months, an index has shown.
SMEs in Singapore are not feeling optimistic about their profitability over the next six months, an index has shown. ST PHOTO: JAMIE KOH

SINGAPORE - Small and medium enterprises here are feeling downbeat about the next six months, especially their level of profitability, a survey found.

An index measuring their outlook showed their profit expectations for the next six months have hit a seven-year low.

Five of six sectors expect their profits to shrink or their companies to incur losses in the next six months.

Their overall business sentiment had the second-lowest score in the seven years since the SBF-DP SME Index was created. The lowest score was recorded just two quarters ago.

The index measures the business outlook of SMEs for the next six months (Q4 of 2016 and Q1 of 2017) and is a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info).

Said SBF CEO Ho Meng Kit: "The lowest profit expectations and second lowest overall index in seven years indicate that our SMEs are barely keeping their heads above water.

"In part, this reflects the constraints of operating in Singapore where costs are high. With excess capacity and sluggish demand, it has become tougher for our smaller businesses.

He also said: "It is not surprising that SMEs remain largely pessimistic about their growth prospects, given the persistently tepid global and domestic economy. Brexit in June, which jolted financial markets initially, may have contributed partly to businesses' weak sentiment for this round of the survey but we do not expect sentiment to improve anytime soon."

More than 3,600 SMEs were surveyed between July and August.

All six industries recorded a decline in their overall index score, a trend observed six months ago.

Transport/Storage registered the largest decline at 4.2 per cent, followed by Business Services at 4.0 per cent. Three other sectors - Commerce/Trading (49.9), Manufacturing (49.2) and Transport/Storage (49.7) - had scores below 50 this quarter, indicating they expect worse trading conditions during the coming six months than they are experiencing now.

Said Mr Ho: "We urge our SMEs to look overseas for growth especially in Asean which will enjoy good growth of 5.2 per cent over the next five years.

"Take your chances and venture overseas. The Federation stands ready to help our members internationalise. If you confine your business in Singapore, be prepared for a long period of low growth or even declining profitability."