WhyItMatters

Tough times ahead for SMEs

The downbeat results of an annual survey of small and medium-sized enterprises (SMEs) released earlier this week were unsurprising given the cloudy global economic outlook.

But they could also hint at deeper reasons for concern.

The SME Development Survey painted a grim picture of small firms bracing themselves for stagnant growth.

The poll found 47 per cent of respondents do not expect turnover growth this year, up from 40 per cent last year, while 6 per cent of respondents this year expect to see sales decline.

Even as SMEs continue grappling with the global growth slowdown, Singapore Business Federation (SBF) chief executive Ho Meng Kit pointed to a potentially more worrying statistic.

He noted a decline in the proportion of less established SMEs responding to the survey - only

10 per cent of respondents this year were less than 10 years old, well down from 37 per cent in 2012.

The three- to 10-year period is a critical one for SMEs, Mr Ho said.

While it might merely indicate fewer such SMEs responded, it could also be a sign that firms are not surviving past this growth stage amid the challenging environment, he added.

The survey - one of few comprehensive, publicly available studies of SMEs here - suggests that rising manpower costs and mounting competition continue to squeeze company bottom lines.

This could be creating a Darwinian environment where only the fittest and strongest firms survive.

Another possibility is that the tough climate is wiping out young, less established companies which could have grown into major players.

Given the lack of available data, it is difficult to tell if the proportion of such firms has indeed fallen, and if so, the reasons behind the decline.

What remains clear is that the global economy offers few bright spots, which means SMEs here are facing tough times ahead.

A version of this article appeared in the print edition of The Straits Times on November 14, 2015, with the headline 'Tough times ahead for SMEs'. Print Edition | Subscribe