Singapore’s mid-market 'reservedly optimistic' about rebound

The number of optimistic mid-sized businesses in Singapore has doubled since the first half of last year, although a sense of caution still prevails in the market. A new Grant Thornton study presents the details.

Mid-sized businesses in the Asia Pacific saw revenues contract by 2% last year, owing to the global pandemic and its repercussions. On the cusp of a new year, Grant Thornton surveyed more than 5,000 business leaders across 29 markets to portray global business sentiment.

In focus here is Singapore, where the mid market believes the journey to economic recovery is well underway. More than 60% of mid-sized businesses in the country are optimistic about economic prospects for the next 12 months – up from around 30% in the first half of 2020.

With a healthier economy in the backdrop, around 30% of the Singaporean mid-market expects an uptick in revenues, profitability and employment over the next year. The numbers reveal a distinctly positive outlook, although further probing reveals strong shades of apprehension as well. 

In fact, all of these growth expectations are flatter than pre-Covid sentiment in Singapore. While optimism is rising, there are still too many moving parts in the Covid-19 saga – with the vaccine yet to be rolled out and infection rates on the up globally. For now, this leaves a looming sense of economic uncertainty, which weighs down on any meaningful rebound.

“It is encouraging to see that economic optimism among mid-market businesses in Singapore has increased in the second half of the year. However, even with the anticipation of a vaccine roll out in Singapore in 2021, the reality is it will still be some time before we return to anything approaching normality,” said David Sandison, Singapore practice leader and head of Tax at Grant Thornton.

Top challenge: uncertainty

More than 60% of the Singaporean mid market positions uncertainty as the biggest limit on growth. Front and centre is business and consumer spending, which plummeted in the wake of the outbreak and has remained subdued ever since. Well over half of businesses report a shortage of orders as a result, while the strain on resources is leaving many unable to afford skilled labour.

What results is a hesitation to spend on growth – marked by a decline in the number of businesses looking to increase their investments across business areas. And there is little solace to be found in financing. APAC’s substantial financing market is also taking a cautious approach under the circumstances, leading more than half of mid-sized businesses to face a shortage of funding.

The problem is that certain investments have emerged as critical to business survival, both during and after the pandemic. Technology is one. Businesses had to make significant digital investments to ensure continuity under lockdown, while only advanced technology can provide them with the agility and efficiency they need to survive in a post-pandemic environment.

“Many businesses have already made transformational changes to their operating models and investments in this area, and this shows no sign of abating as everyone looks to ensure they are able to compete in a post-Covid world,” said Sandison. Indeed, 30% of mid-sized businesses in Singapore expect to up their tech investments this year.

A similar share are also focused on upskilling their staff and developing innovative productrs and solutions. As they make these changes in a cash-strapped environment, many are also more risk aware in the recovery phase. Areas like supply chain risks, cyber risks, regulatory risks or even changing customer behaviour are all on the priority list for at least half of the Singaporean mid market.

The confidence in economic recovery combined with a reckoning for things as they are now is giving rise to what Grant Thornton describes as “reserved optimism” among mid-sized businesses in Singapore. “Mid-market business leaders are being very realistic about the challenges that the first half of 2021 will bring,” concluded Francesca Lagerberg, global leader at Grant Thornton International.