Singapore businesses are approaching 2023 with greater caution as manpower challenges and increased costs emerge as key areas of concern.
According to the Singapore Business Federation’s latest National Business Survey (NBS) 2022/2023, almost all businesses report facing manpower issues, especially those related to manpower costs and foreign manpower.
Wages pose the biggest cost challenge to companies as they compete to attract and retain talent.
The survey, conducted between 29 August and 23 November 2022, reflected responses from 931 companies across all key sectors and covered a wide range of topics including current business sentiment, the impact of inflation and supply chain disruptions, current challenges, business priorities, digitalisation, transformation, internationalisation, and issues related to ESG.
Of the 931 companies, 73% were small and medium-sized enterprises (SMEs) and 27% were large companies
Current sentiments are more positive but there is a greater sense of cautiousness in the year ahead
For the second consecutive year since the pandemic, business sentiments have continued to rise, from 23% in 2020 to 37% in 2021 and 52% in 2022.
Looking ahead to the next 12 months, there is a greater sense of cautiousness. 40% of businesses expect the local economy to improve in 2023 (down from 47% in 2021), while 26% of businesses think it will worsen (up from 13% in 2021).
In line with the cautious sentiments, 97% of businesses expect current inflationary pressures to continue into 2023.
Despite expecting inflationary pressures to persist, 80% of businesses remain confident in the resiliency of their operations in the next 12 months, with large companies (89%) being somewhat more confident compared to SMEs (77%).
To mitigate inflationary risks, implementing cost saving measures (55%), increasing price of products/services (42%), and renegotiation of financial terms with suppliers and customers (38%) are the top 3 strategies adopted by businesses.
On top of manpower issues, increasing cost is the top challenge faced by Singapore businesses
96% of businesses continue to face manpower issues, especially those related to manpower costs and foreign manpower. These issues are multi-faceted, including rising manpower cost (75%), attracting and/or retaining younger workers (51%), new foreign manpower policies raising costs (48%), limited pool of local high-skilled labour (47%) and stricter policies that restrict the supply of foreign workers (43%).
Businesses’ top cost challenges are those related to wages (79%), logistical costs (52%), overall cost pass through (48%), procurement costs (48%), and utilities (45%).
Looking ahead, companies plan to increase salaries (40%), invest more in new technologies (32%) and staff training (27%), re-engineer business and operational processes (28%), as well as diversify their supply chains to build resiliency (27%). Top priorities for businesses are growing revenue (66%), reducing costs (43%) and ensuring positive cash flow (42%).
Singapore businesses are committed in driving business transformation and incorporating Environmental, Social and Governance (ESG) as part of their company activities
Businesses remain committed in driving business transformation, and this is primarily done through operational process (71% indicating it as very important), customer service (70%) and products & services innovation (70%).
Their commitment to digital transformation is strengthened by the benefits that business transformation and digitalisation have brought, which include increased productivity (54%), greater scope in optimising operations (48%), and reducing operational costs (44%).
Confidence in the prevention of cyber-attacks remains high, with 74% of businesses confident that their security measures can protect against cyber threats.
Their biggest concern is the risk originating from third-party service providers (61%), employees’ lack of awareness of cyber security (45%) and suppliers or multiple cloud services (41%).
For ESG, 75% of businesses have implemented at least one ESG area, with the top ESG areas implemented being ‘Employee health & safety’ (81%), and ‘Fair and equitable employee pay & rewards policies’ (71%).
Looking ahead, companies are planning to do more in ESG areas such as ‘Increasing sustainability in business supply chain’ (45%), ‘Mitigating supply chain risks’ (43%), ‘Inclusion & diversity in business’ (43%), and ‘Contributing to communities’ (40%), amongst others.