Manpower, rent and weak demand drag businesses’ profits

Rising costs push Singapore firms into profit decline

Only 4% of firms surveyed by the Singapore Business Federation (SBF) reported higher profitability over the past 12 months, whilst 34% indicated a decline.

The aggregate profitability-expectations score fell 2.9 points to 48.5, measured by the Business Sentiment Index (BSI), signalling subdued margin expectations for 2026.

Cost pressures remain the primary challenge. About 63% of respondents cited rising manpower expenses, 44% pointed to demand uncertainty, and 40% reported higher rental costs as key constraints. Logistics and supply-chain costs also contributed to tighter margins.

The impact differs by sector. Hotels, restaurants, retail and wholesale trade reported the lowest profitability expectations, whilst banking, insurance and real estate firms recorded scores above 59. SMEs were generally more pessimistic than large firms, with 38% expecting deteriorating conditions compared with 34% of large firms, according to SBF's findings.

Firms are adjusting to these pressures through cost-saving measures, price adjustments and inventory management. Hiring intentions and wage growth plans have cooled, with only 36% of companies planning to expand headcount and 41% considering wage freezes over the next 12 months.

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