Singapore’s Small Businesses Fear Labour Cost Rises: Research

Restrictions on foreign workers are prompting labour cost fears amongst Singapore’s small and medium sized enterprises (SMEs), according to new findings from ACCA (the Association of Chartered Certified Accountants) and the Institute of Management Accountants (IMA) in their Global Economic Conditions Survey (GECS) analysis.


“Overall, businesses in Singapore were the most positive among the major ACCA and IMA markets towards their Government response to the economic downturn, with 46% of SMEs rating this as good, far above the global average of 15%. Large corporates in Singapore were similarly positive," says Leong Soo Yee, Head of ACCA Singapore. "Furthermore, readings from the GECS Government spending index showed that many SME finance professionals responding from Singapore were satisfied that government spending would meet their expectations over the medium term.”


The research revealed that confidence in the global economic recovery reached a low point amongst Singapore’s small businesses in the second half of 2012 and while some faith has been restored in 2013, it is weaker amongst small businesses than in the larger corporations.


A higher number of Singapore’s SMEs (58%) reported lack of investment opportunities during that period than large Singapore corporates (49%) and the global average for SMEs (47%).


“There are some positive patterns emerging for Singapore’s SMEs," says Gabriel Low, Fellow of ACCA and member of ACCA’s Global Forum for SMEs. Over the 21 month period ACCA and IMA analysed, there has been a steady improvement in business confidence. Unlike their larger counterparts, SMEs in Singapore have not had to cut staff numbers by anywhere near as much. Some 51% of large and mid-market companies cut staff numbers compared to just 29 % at the smaller end of the business spectrum (companies with less than 250 employees).


The Singapore Business Federation (SBF) has been conducting the SBF-DP SME Index – a forward-looking measurement of Singapore SME business sentiments over the past 3.5 years.


The findings of the July- December 2013 survey indicates that an increasing number of SMEs are focusing their attention on productivity improvements as they adjust to higher labour costs.


"The pickup in investment and business expansion indicators are signs that SMEs are making a concerted effort to drive growth by investing in better processes and equipment rather than through manpower increase. SMEs are also increasingly looking to emerging markets in Asia and further away such as Africa to drive growth," said Ho Meng Kit. CEO of the Singapore Business Federation (SBF).


The Global Outlook
The GECS surveys revealed an interesting trend - business size influenced the type of economic recovery measures businesses took. With profit margins under pressure, that micro and small businesses were more likely to seek shelter from competition in niche markets or segments, mid-market firms were more likely to enter new markets whilst large corporates were more likely to pursue innovation.


“Now is the time for SMEs to prioritise investment and look for internationally focused market growth, as well as prepare for a more stable economy,” says Leong Soo Yee.


SMEs globally continued to face a tough environment with substantial pressure on profit margins; 89% of SMEs were under pressure from economic conditions on the ground, with tightening profit margins emerging as a major issue. This was especially true in emerging markets, where demand remained weak and inflation pressures intensified.


Despite these pressures, small and medium businesses were less likely than larger ones to have responded to economic pressures with a loss of business capacity, holding back on staff cutbacks and capital investment.