Singapore SMEs weather the COVID-19 storm through self-directed coping strategies and government support measures
- All Industries - | 15 Jul 2021
“Singapore SMEs have shown resilience in the face of the economic fallout due to the global health crisis, through self-driven coping strategies and swift support measures from the Government. As the global health crisis continues, small businesses need to invest in developing their manpower and digital capabilities in order to meet new market demands.”
Small and medium-size enterprises (SMEs) are the backbone of the Singapore’s economic landscape. SMEs contribute to nearly half of Singapore’s GDP and employ about 70% of the local workforce (SingStat, 2021).
The COVID-19 pandemic brought about unprecedented business challenges for SMEs. According to IndSights Research’s quarterly Business Sentiments Survey (BSS), almost 9 in 10 saw their business operations at least somewhat impacted. 3 in 5 SMEs reported a decline in their revenues as a result of the pandemic.
SMEs tend to be more vulnerable to the economic effects of the pandemic compared to larger multinational corporations, as their smaller firm sizes often means financial reserves or access to investment capabilities are limited.
Small businesses in the non-ICT sectors face stronger headwinds than those in the ICT sector
Small businesses in the non-Information, Communication and Technology (non-ICT) sectors face stronger headwinds. About 4 in 5 non-ICT companies said they were ‘moderately to extremely impacted’ by the pandemic, compared to just 3 in 5 ICT companies.
Overall, the non-ICT sectors are also more cautious of their industry situation, with most companies continuing to hold average sentiments since early 2020 to date. The BSS found that more than 75% of companies from the Hotel, Construction and Transport sectors has a poorer view of their industry outlook compared to other sectors, as prolonged border controls and strict social distancing measures continued to negatively impact their business operations.
In contrast, ICT companies’ optimism of their business situation steadily improved from FY20Q3. The pandemic has accelerated the need for technological adoption across industries, therefore the surge in demand for tech services and support had undoubtedly benefited the sector.
Despite differing opinions about their industry outlook, SMEs from ICT and non-ICT sectors share similar business concerns. On average, the fear of business disruptions due to COVID-19 was their key concern (61%), followed by low demand for products and services (54%) and the cost of doing business in Singapore (51%).
However, manpower concerns were observed to affect ICT companies more than their non-ICT peers, particularly the lack of skilled tech talent in Singapore. Already in short supply for several years before the pandemic, the shortage of tech talent is now exacerbated by tightened cross-border controls and stricter foreign manpower hiring policies.
SMEs kept afloat with self-driven strategies and government support
Despite being dogged by business continuity concerns, about half of the SMEs polled managed to register a profit in FY2020. What steps had SMEs taken to not only address their business concerns but also keep their heads above water? More than a year into the global health crisis, the resurgence of new virus strains continues to make the domestic and global marketplace unpredictable.
Most SMEs polled planned to seek financial assistance to stay afloat in 1H 2021. Industry players that IndSights Research spoke to in a series of focus group discussions said support schemes such as the Jobs Growth Incentive (JGI) helped to defray manpower hiring costs, which forms a substantial portion of business operations. According to the OECD, government intervention in times of crisis reduces the incidence of SMEs running out of liquidity (OECD, 2020). Therefore, it is reasonable to believe that the recent announcement of the extension of COVID-19 support measures until March 2022 (Monetary Authority of Singapore, 2021) would be well-received, especially for many small businesses that continue to face economic challenges due to the pandemic.
In terms of coping with manpower issues, it is heartening to see that companies are least likely to consider drastic measures such as staff layoffs. In fact, recent FY21Q1 BSS data found that several industries, particularly Construction, Environmental Services, ICT and Security are looking to increase manpower in the coming months. This is in line with a recent report by the Ministry of Manpower (The Straits Times, 2021) that said Singapore’s labour market grew for the first time in FY21Q1 after four consecutive quarters of decline, driven by more placement of retrenched workers and job vacancies.
SMEs explore growth strategies despite economic uncertainties
Singapore’s small businesses are also determined to not just safeguard their survival, but also ensure long-term competitiveness when the economy recovers. Activities related to business expansion and innovation were key areas that SMEs intended to invest in for 1H 2021. Productivity improvements through IT solutions was their next area of priority, with almost 7 in 10 looking to increase or maintain budgets in this area.
More companies in the non-ICT sector (particularly those in the Food Services industry), were looking to engage in digitalisation plans, compared to their peers in the ICT sector. The need for technological transformation is no longer unique to the ICT companies. The pandemic has shifted customer interactions to remote or online channels, forcing industries that are traditionally labour-dependent or that rely on physical operations to adopt technological solutions to stay relevant in the marketplace. To better support SMEs in deepening their digital capabilities, the Singapore government has rolled out various initiatives (e.g. SMEs Go Digital programme) to facilitate the transformation process.
While training appeared to be of relatively lower priority for, it is important for companies to place greater emphasis on upskilling their workforce for successful technological adoption and meet new market demands.
As the global health crisis enters its second year, SMEs, particularly smaller companies in some industries, remain in a tenuous position. The gradual reopening of Singapore’s economy and relaxation of business restrictions, coupled with the recent announcement of the extension of Budget support measures undoubtedly provide a much-needed boost of confidence for local small businesses. However, economic recovery may still be potentially derailed by another wave of COVID-19 cases or delays in vaccination programmes. Therefore, it is important for SMEs to continue to invest in manpower upskilling and explore digitalisation initiatives to ensure sustainable competitiveness and business continuity.
For more information about the assistance grants and schemes available to help small businesses thrive amidst the pandemic, visit our one-stop resource page to browse assistance schemes grouped according to business stage/ function. You can also use the e-adviser on GovAssist to find schemes relevant to your needs.
IndSights Research’s Business Sentiment Survey (BSS) tracks local businesses’ opinions on various issues affecting Information and Communications Technology (ICT) companies, as well as businesses in all major industries in Singapore. Findings drew on data collected between July 2020 to May 2021 from more than 1,500 business leaders across industries in Singapore.
For more information about IndSights Research’s Business Sentiment Survey, or findings on specific sectors, please contact us here.
- SingStat (May, 2021). MTI Maintains 2021 GDP Growth Forecast at “4.0 to 6.0 Per Cent” Amidst Significant Uncertainties Arising from the COVID-19 Pandemic [Press Release]. Retrieved from https://www.singstat.gov.sg/-/media/files/news/gdp1q2021.pdf
- The Straits Times: https://www.straitstimes.com/singapore/jobs/spores-labour-market-continues-recovery-into-first-quarter-but-not-back-to-pre-covid
- Monetary Authority of Singapore (June, 2021). Supporting Businesses through COVID-19: Support measures to ease cashflow constraints and assist businesses. Retrieved from https://www.mas.gov.sg/regulation/covid-19/supporting-businesses-through-covid-19
- OECD (July 2020). Coronavirus (COVID-19): SME policy responses. Retrieved from https://www.oecd.org/coronavirus/policy-responses/coronavirus-covid-19-sme-policy-responses-04440101/
This article is contributed by Serene Lim, Manager (Research), IndSights Research.