SME sentiment at its highest since start of pandemic: Survey

Sentiment among small and medium-sized enterprises (SMEs) is at its highest since the pandemic began, with companies looking beyond survival to seize new opportunities, a survey noted yesterday.

The sentiment index surrounding the second to third quarters of this year has hit 49.9 - up from 48.2 in the first three months of the year - the highest reading since the pandemic began early last year.

A reading of 50 means companies are neutral regarding their prospects, while anything above it indicates companies expect to expand over the next six months. A reading below 50 points to expectations that business will contract.

"This second consecutive improvement in the reading of the quarterly index shows that business sentiments among SMEs are on the rise," said Mr Lam Yi Young, chief executive of the Singapore Business Federation (SBF).

"The gradual reopening of our economy, the easing of business restrictions, and the wide range of Budget measures announced earlier this year have given a much-needed boost to the confidence of our SMEs."

The SBF and information services company Experian compiled the index after a poll of about 2,100 local SMEs in six sectors that was conducted from Jan 18 to Feb 26.

The sectors polled were commerce and trading; construction and engineering; manufacturing; retail and food and beverage; business services; and transport and storage.

Companies in internal-facing sectors, like construction and engineering, saw the biggest leap in outlook.

"This is likely due to the easing of Covid-19 restrictions, which has enabled the resumption of business activities on a broader scale," the SBF said.

SMEs registered improvements across all seven indicators used to compile the index - turnover, profitability, business expansion, capital investment, hiring, capacity utilisation and access to financing.

Most notably, they are expecting an easing of their access to financing for the first time since the second and third quarters of 2019.

Most SMEs anticipate a sales rebound over the next six months amid an easing of business restrictions, the SBF said.

Companies have also increased their capital investment expectations to keep pace with changed work processes, such as remote working on a broad scale.

They might also be exploring opportunities delayed by the pandemic, the SBF said.

It added that hiring expectations rose to support expansion. "The ongoing economic recovery and availability of various government support measures may also have boosted the ability of SMEs to replace and bolster their workforce."

Mr James Gothard, Experian's general manager for credit services and strategy for South-east Asia, said: "Following an unprecedented contraction of the economy in 2020, this year is poised to be characterised by promising signs of a partial and gradual recovery.

"While SMEs remain cautious in the near term, many are keeping an eye on business opportunities."

Mr Gothard said SMEs appear to be gradually relaxing the wait-and-see approach they had previously adopted as the uncertainty dominating preceding quarters begins to recede, but he warned that the pandemic poses ongoing risks.

"It will remain important for SMEs to boost their overall resiliency towards any unexpected shocks to the global economy," he said.

"With government support schemes for SMEs continuing into 2021, SMEs will need to explore and invest in aspects such as manpower upskilling and digitalisation, both of which could help firms remain competitive and relevant in the long term."

Mr Lam said: "Many are looking forward to rebuilding their businesses after the devastating impact of the Covid-19 pandemic. SBF is also revving up our efforts to support our SMEs with guided assistance and to help them position for recovery and growth."

A version of this article appeared in the print edition of The Straits Times on April 08, 2021, with the headline 'SME sentiment at its highest since start of pandemic: Survey'. Subscribe