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SMEs see little cheer ahead in new year

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Survey: Business sentiment index lowest in 7 years

Small- and medium-sized enterprises (SMEs) are pessimistic about the first six months of next year and expect a reduction in both turnover and profitability, according to a survey released yesterday.

The gloomy mood generated a reading of 49.8 on a quarterly index compiled by the Singapore Business Federation (SBF) and DP Information Group (DP Info), which is part of the Experian Group.

This is the first time in the seven-year history of the index that it has fallen below 50, which indicates that firms are downbeat about the next six months.

More than 3,600 SMEs were surveyed between October andlast month for the index, which measured sentiment about the January to June period next year.


Five of the six industries polled have a negative outlook for the coming half-year: commerce and trading, transport and storage, construction and engineering, manufacturing, retail and food and beverage.

The sixth, business services, recorded a neutral score of 50.5.

Scores for turnover and profitability expectations were also at record lows.

Only business services firms were hopeful that sales will be maintained, while SMEs in other industries expect turnover to slide in the next six months.

The survey also showed that SMEs expect profits to fall in the first half of next year on the back of reduced sales and rising operational costs.

Construction and engineering, manufacturing, retail and food and beverage, and transport and storage SMEs are expecting reduced earnings, with the steepest fall expected in construction and engineering.

Mr Nick Boyle, managing director for South-east Asia and emerging markets at Experian, said global factors were weighing heavily on the minds of SMEs.

"The second half of 2016 has seen many developments which would make an SME leader worried about the future," he said.

"The UK Brexit referendum together with the delay in finalising the Singapore-European Union Free Trade Agreement has resulted in a decline in Singapore's exports to Europe.

"We have also witnessed a US election where both presidential candidates campaigned against the Trans-Pacific Partnership Agreement."

SBF chief executive Ho Meng Kit said SMEs are facing challenging conditions in a tough economic climate.

He said: "Slowing growth and global volatility amid the ongoing economic restructuring, coupled with rising business costs, will continue to pose formidable headwinds for SMEs."

An SME committee led by the federation will submit recommendations for Budget 2017 aimed at helping firms cope with high business costs, Mr Ho added.

"The recommendations will also focus on helping SMEs sustain growth particularly during this current economic climate, as well as support scalable, local-based enterprises to develop into globally competitive companies," he said.