SMEs' growth momentum muted for the last 5 quarters
SMEs need to overcome restructuring challenges to rediscover their drive for growth and expansion
16 July 2014 [Singapore] - Singapore SMEs’ growth expectations are weak as the economy undergoes restructuring.
This is the key observation of the latest SBF-DP SME Index, a joint initiative of the Singapore Business Federation (SBF) and DP Information Group (DP Info). It is a six-month forward-looking Index which measures the sentiments of SMEs.
The Overall Index for this quarter rose by a mere 0.5 points to 54.9. A score above 50 indicates that SMEs have a positive outlook for their business prospects for the next six months. SMEs, while positive in their overall outlook, are slightly dampened in their momentum for growth.
The Index which measured SME sentiments from July to December 2014, is based on 3,000 interviews with SME owners and managers, and the financial performance of SMEs. Five industry sectors are tracked – Business Services, Commerce/Trading, Construction/Engineering, Manufacturing, and Transport/Storage.
Whilst three of the five tracked sectors reported a slightly improved outlook compared to the last quarter, Commerce/Trading (54.8) and Business Services (54.8) indicated a slight dampening in outlook for the next 6 months.
The bright spot is that Overall Capital Investment Expectations have risen to 5.49 from 5.43 last quarter. This is seen across all sectors, a first for 2014. This is driven by the increasing uptakes of PIC grants and a concerted effort by SMEs to automate their processes.
Overall Turnover Expectations improved by 0.93% from last quarter
Construction/Engineering is one of the two sectors to see a drop in turnover expectations, from 5.66 to 5.61. As the latest round of increased foreign workers levies kicks in from July, firms are further constrained in their ability to take on new projects.
Continued manpower constraints faced by SMEs are likely to result in a less robust growth momentum.
Ms Chen Yew Nah, Managing Director of DP Info said “Overcoming the manpower challenge with a transformational shift in mind set is the key to SMEs’ future growth.”
“Tightening labour constraints continuously dog SMEs with a less than robust expected growth, hampering their capacity to actively grow their top lines amidst expansion opportunities.”
Mr Ho Meng Kit, CEO of Singapore Business Federation, commented that SMEs’ sentiments have stayed muted over the past two years. “It is not negative but it is not in great positive territory either. Certainly this dampened sentiment is not reflective of the global economic situation with the recovery of the G3 markets and good expectations for growth in Asia. Clearly our SMEs are affected by the domestic constraints in Singapore. Meanwhile, the policy measures introduced by the Government for economic restructuring have not borne fruit yet but there are encouraging signs that they will, with SMEs tapping on incentives and investing in capital. SMEs need to move away from reactive correction to a more transformational approach to achieve robust and sustained growth.”
“We urge Singapore SMEs to come to terms with their restructuring challenges and focus on rediscovering their drive for growth and expansion.” Mr Ho said.
“There are several examples of companies, particularly in the Manufacturing and Construction/Engineering sectors, that have invested in technology and automation, as well redesigned their processes to realise improved overall efficiency, quality and productivity” he added.
He also called upon Government to do more to help SMEs, in particular smaller SMEs, take on more or larger projects. “It is a positive sign that Budget 2014 saw commitment to nurturing tech start-ups in the IT sector through government procurement. Perhaps similar initiatives could be done to benefit more sectors “, Mr Ho added.