More firms tipped to close in coming months, say experts

Business closures are expected to rise in the coming months, given that initiatives such as support schemes and debt moratoriums are tapering off.
Business closures are expected to rise in the coming months, given that initiatives such as support schemes and debt moratoriums are tapering off.ST PHOTO: GAVIN FOO

Despite a recent uptrend in business formations in Singapore, entity closures are also expected to rise in the coming months, experts told The Sunday Times.

Around 35,400 were deregistered between January and October - lower than the average of 41,100 seen over the same 10-month period between 2015 and last year, according to data from the Accounting and Corporate Regulatory Authority (Acra).

But Mr Gerard Toh, partner at professional services firm KPMG, expects closures to rise in the coming months, given that initiatives such as the Jobs Support Scheme and debt moratoriums are tapering off. Brick-and-mortar retailers, firms that have yet to explore digitalisation, and those which are subject to limits on physical crowds, are more likely to close, he added.

The recently-introduced Simplified Insolvency Programme, which helps companies that are no longer viable to wind up efficiently, is also expected to make it easier and cheaper for some micro and small firms to exit the market.

The Acra data may not have fully reflected the current slate of declining businesses, said Professor Wong Poh Kam of the National University of Singapore.

He pointed out that winding up a company could take up to a year, as debts and legal obligations need to be settled before the firm can be deregistered. In some cases, the process could take several years, he added.

Mr Tee Wey Lih, director at restructuring specialist Acres Advisory, said winding up micro companies with annual revenue of less than $1 million usually takes nine months to a year.

While his firm has not seen an increase in closures in the second half of the year so far, he added that there was a significant increase in inquiries this month, especially from the retail and food and beverage sectors. The businesses ranged from start-ups to more established organisations, and most of them had cash-flow issues, Mr Tee noted.

"With so much uncertainty, the owners are not prepared to inject capital to sustain the businesses," he added.

A version of this article appeared in the print edition of The Sunday Times on November 29, 2020, with the headline 'More firms tipped to close in coming months, say experts'. Subscribe