Singapore businesses more optimistic about recovery

Photo by John Towner

According to SBF’s latest National Business Survey (NBS) 2021/2022, businesses in Singapore are more optimistic compared to last year despite the continued challenges posed by COVID-19.

The survey, conducted from 26 July 2021 to 1 October 2021, received responses from 1,096 companies across all key sectors and covered a wide range of topics including current business sentiment, the impact of COVID-19, current challenges and priorities, prospects ahead, government support, digitalisation and transformation, and internationalisation. Of the 1,096 companies, 80% were small and medium-sized enterprises (SMEs) and 20% were large companies.

Signs of recovery as businesses adapt to living with endemic COVID-19

Optimism among the business community in Singapore has risen in 2021, as more companies shift from survival mode to recovery mode in 2021. 37% of businesses are satisfied with the current local business climate, a rise from 23% in 2020. More than half of the companies (56%) reported no impact from COVID-19, an improvement from 31% in 2020. The proportion of companies that reported being negatively impacted has halved from 63% in 2020 to 32% in 2021, while those that reported positive impact doubled from 6% to 12%.

In line with the growing optimism, nearly eight in ten businesses (79%) are confident of sustaining their business operations over the next 12 months, a sentiment shared among SMEs and large companies alike.

Notwithstanding, the pace of recovery remains uneven across industries and companies. The Construction and Civil engineering (42%), and Retail, Real estate, Hotels, Restaurants and Accommodations (38%) sectors have the highest proportion of companies reporting being negatively impacted. Conversely, the Banking & Insurance (73%) and the IT & Professional Services (64%) sectors had the highest proportion of companies reporting no impact from the pandemic.

As for the business outlook over the next 12 months, there is an improvement in sentiments, with 47% of businesses expecting the economic climate to improve. This is a significant improvement from 31% in last year’s survey. The outlook for the next 12 months continues to be uneven across industries, with Construction & Civil Engineering (40%) and Retail, Real Estate, Hotels, Restaurants & Accommodations (46%) being less optimistic than sectors such as Banking & Insurance (77%).

Manpower issues are key challenges for businesses

Manpower cost (48%), demand uncertainty (48%), travel restrictions (47%) and availability of manpower (41%) emerged as the top business challenges this year. The top 4 business challenges are similar for SMEs and large companies alike. Among the challenges faced by businesses, manpower issues remain the most critical. Key manpower challenges include rising manpower cost (62%), new foreign manpower policies raising cost (50%), attracting/retaining younger workers (45%), and stricter policies that restrict the supply of foreign workers (44%).

In response to the current manpower crunch, businesses are stepping up their recruitment efforts to hire locals (43%) and raise wages (39%). Some companies have also taken steps to invest in technology to reduce manpower needs (36%). Some businesses are also choosing different approaches such as redesigning jobs to attract locals (30%), outsourcing to local third-party contractors (25%), or delaying expansion plans (22%).

Despite the above, many businesses are looking to strengthen their workforce in 2022. More than a third (35%) of companies surveyed intend to increase hiring, while a similar proportion of companies plan to raise salaries of existing staff in 2022. Also, one in three (30%) businesses have indicated that they will invest more in staff training, while 15% are seeking to increase non-salary benefits.

Digitalisation remains central to business transformation

In response to the challenges arising from COVID-19, 94% of companies recognise the importance of business transformation to maintain competitiveness, with the willingness to adopt technology remaining consistently high in recent years.

The key areas of transformation in which businesses intend to increase their focus for the next year include digitalisation and investment in new technologies (42%), re-engineering of business and operational processes (31%) and diversification of supply chains (23%).

The benefits of digital transformation are also clear to businesses — increased productivity (59%), more scope to optimise their operations (48%), and reduced operation costs (46%).

However, businesses remain wary about the potential cost of change, particularly the high cost of new technology adoption (52%) and upskilling of staff to keep pace with the new technologies (30%). Three in ten (30%) companies worry about cyber security risks associated with digitalisation.

Assistance in digitalisation is top priority for Budget 2022

As businesses seek to digitalise, transform and uplift capabilities, the top area of government support required by businesses is digitalisation (43%). Other areas of support required include financial aid (38%), human capital development (37%) and financial management to optimise performance (37%). Businesses indicated these as being most relevant in helping them emerge stronger.

While SMEs and large companies share similar expectations for Budget 2022, their top priorities differ. SMEs hope to see greater support in managing business operations — assistance on digitalisation (42%) and financial support (39%).

Large companies though, seek greater support on the manpower front — human capital development (51%) and assistance on digitalisation (46%).

Reflecting on the survey results, Mr Lam Yi Young, CEO of SBF, said, “2021 has been a year of ups and downs for many businesses given the evolving COVID-19 situation. Notwithstanding this, the strong economic growth in 2021 has boosted business confidence and the focus of more businesses has shifted from survival to recovery.

Looking to 2022, businesses remain optimistic about recovery and growth, given the expected economic growth and the gradual reopening of borders with the Vaccinated Travel Lanes. However, there remains many uncertainties and unevenness across industries, especially with emergence of the Omicron variant.”