SME profit outlook hits seven-year low, survey shows

The profit outlook among small and medium-sized enterprises (SMEs) here has hit a seven-year low amid increasing concerns about profitability over the next six months, according to a new survey.

Five out of six sectors polled by the Singapore Business Federation (SBF) and DP Information Group said they expected their profits to shrink or their companies to incur losses in the next six months.

Overall business sentiment dropped to 50.2, the second-lowest level in the seven years since the SBF-DP SME Index was created.

The lowest score of 50 was recorded just two quarters ago.

SBF chief executive Ho Meng Kit said the weak sentiment indicates that 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 added. "It is not surprising that SMEs remain largely pessimistic about their growth prospects, given the persistently tepid global and domestic economy."

The Brexit vote in June, which jolted financial markets initially, may have contributed partly to businesses' weak sentiment for this round of the survey, he said, adding that he does not expect the mood to improve any time soon.

More than 3,600 SMEs were surveyed from July to August. The index is reported quarterly but asks business owners' for their outlook over the next six months.

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

Businesses in the transport and storage sector registered the largest decline in sentiment, followed by those in business services.

Three other sectors - commerce and trading, manufacturing, and transport and storage - registered index scores of below 50 this quarter, indicating they expected worse trading conditions during the coming six months than they are experiencing now.

"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," Mr Ho said. "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."

A version of this article appeared in the print edition of The Straits Times on September 23, 2016, with the headline 'SME profit outlook hits seven-year low, survey shows'. Print Edition | Subscribe