Singapore SMEs optimistic despite economic headwinds

According to Sage Group’s survey, Singapore businesses were among the most confident in the recovery of their country’s economy, while companies in the UK and US were the most pessimistic.

The Sage Group released the survey results of the The Sage Business Index – International Business Insights. Polling over 10,000 businesses across Europe, North America, Africa and Asia, the research shows general declining confidence in global and local economies, but cautious optimism in businesses’ own prospects over the next six months.

The research also revealed that most businesses’ performance held steady or improved over the last six months, and, despite the challenges ahead, are looking to invest and expand in the next six months. Businesses are also once again calling on governments around the world to provide more support and cut red tape which they say is not only hampering their growth but also general economic improvement.

The survey was conducted by Populus on behalf of The Sage Group PLC and it was done in July/August 2011. The clients of The Sage Group PLX were polled in the US, UK, Canada, France, Germany, Austria, Spain, South Africa, Singapore and Malaysia.

Economic Confidence – overall decline countered by some positive signs at country level

Across the board, businesses in all countries said that compared to six months ago, they felt the global economy was in decline with the average index score coming out at 44.47. This is in contrast with views earlier this year where the index showed that businesses were slightly more positive about the recovery in the global economy with a score of 52.13. Of all the countries surveyed, companies in the UK and the US were the most pessimistic, while those in Malaysia and Singapore were the least gloomy. German businesses have witnessed the most significant drop in economic confidence when it comes to global economic outlook, with their score falling from 61.07 to 46.94, although this still leaves them the most confident of western economies surveyed.

When it came to the businesses’ local economy, the picture was mixed, but overall the index score of 47.11 shows that most businesses felt their local economies had only slightly declined compared to the global economy. This is in sharp contrast to the last index where businesses saw an improving picture at 57.17. The survey also showed a gulf between businesses that felt the last six months had improved - those in Canada, (which was the most positive about their country’s economy), Germany, Austria and Malaysia/Singapore - with those seeing a decline – in the UK and the US, and Spain being the most pessimistic.

Mr Guy Berruyer, Chief Executive of The Sage Group said: “Tenacity and resilience are of part of small and mid-sized businesses’ DNA. Despite the wider economic circumstances, they are focussing on what they need to do to continue growing. Even while we were carrying out the fieldwork for this edition of the Business Index there was significant change in financial markets and a lot of bad news about the global economy, leading, not surprisingly, to a drop in confidence. Nevertheless the respondents to our survey are showing their entrepreneurial spirit and plan to invest for the future.”

Business Outlook – marginal but significant improvement
The only positive score, 57.88, in this index came when businesses were asked if they are more or less confident about their own prospects over the next six months. In the last Business Index, businesses rated their confidence at 56.48 although a marginal improvement, but when taken into context with the negative economic sentiment, this positive outlook appears significant.

Outlook in Malaysia and Singapore
Business in Malaysia and Singapore had the highest score (69.7), followed by South Africa (62.58). Of the countries surveyed both in this and the previous survey, Canadian businesses showed the largest increase in confidence about their own prospects with a score of 59.38, compared to 55.08 six months ago.

Business Performance and Challenges – revenues maintained, energy cost challenges
Despite these wider conditions, some positive news came from the businesses surveyed with over a third (35 percent) showing revenue increase over the last six months, and nearly the same (34 percent) holding steady. Only 12 percent said they were forced to reduce the number of employees, with Spain being the major exception where 24 percent of businesses have reduced the number of employees. For the many who felt their biggest challenge would be maintaining or growing revenue in the last index, two thirds have managed to do so.

In fact, the biggest challenge faced over the last six months was the rising costs of energy, fuel and raw materials, with nearly half (47 percent) selecting this option in their top three challenges. The countries feeling this most acutely were the UK, South Africa and Germany. One in five businesses in the US saw political instability as a challenge, while in Malaysia/Singapore a quarter were challenged by recruiting skilled workers.

Unsurprisingly the biggest challenge businesses expect to face over the next six months is to maintain and grow revenue with 46 percent selecting this in their top three, followed by rising costs of fuel, energy and raw materials as well as gaining new customers and accessing new markets at 43 percent each.