Business optimism in Singapore increased for 2025, but manpower costs and demand uncertainty remain key concerns. These are the findings of the National Business Survey 2024 – Annual Business Sentiment Edition report, released by the Singapore Business Federation (SBF) in January 2025. Administered annually, the report provides insights into the business sentiments and financing-related issues faced by businesses in Singapore, as well as the government support required.
Conducted from 11 October to 11 November 2024, the survey gathered responses from 519 businesses across all key industries, comprising 83% small and medium-sized enterprises (SMEs) and 17% large companies. The data and insights from the survey seek to inform the Singapore Budget 2025 recommendations, to strengthen and build globally competitive and sustainable businesses.
According to the report, 40% of businesses are satisfied with the current business climate, up 10 percentage points from mid-2024. More businesses also expect the economy to improve (26%), compared to worsen (22%), in the next 12 months.
Increased satisfaction with current business climate in Singapore
Businesses sustain profitability despite challenges
While manpower costs continued to be the top challenge for businesses (66%), customer demand uncertainty has risen sharply – from 30% in 2023 to 45% in 2024 – as the second top challenge. This was followed by rental costs – from 36% in 2023 to 43% in 2024. Sectors such as Hotels, Restaurants and Accommodations (80%), Retail Trade (75%) and Wholesale Trade (59%) are most impacted by the uncertainty in customer demand.
Top business challenges to operate in Singapore
Despite rising business costs, one in two businesses (57%) have managed to maintain or increase profitability over the past year. The remaining 43% of businesses reported a decline in profitability, with an average decrease of 27.5%. To mitigate cost pressures, 51% of businesses have implemented cost-saving measures, 41% have raised the prices of their products or services, and 30% have improved their inventory management.
Reflecting the resilience of businesses, a significant 54% of businesses indicated they do not face a liquidity issue. However, among the 25% of businesses experiencing severe to moderate credit crunch, 40% lack sufficient funds to sustain operations for the next three to six months. In response, businesses are prioritising the reduction of non-essential outflows and assessing customers’ credit risks to enhance collections and meet liquidity needs. Some 70% of businesses also seek government support programmes to help manage their financing needs.
Nonetheless, more companies are investing in their future, with 36% (up seven percentage points) planning to focus on staff training, 37% (up five percentage points) on new technologies and digitalisation, and 26% (up five percentage points) on new investments, over the next 12 months.
Positive views on foreign talent; Singapore’s global talent hub status wanes
With limited local manpower and low unemployment rate, a complementary foreign workforce is needed to sustain Singapore’s economic competitiveness. The majority of businesses (59%) believe that their local employees view foreign workers positively, with only 7% perceiving them as competitive. However, the proportion of businesses that rate Singapore as a highly attractive global talent hub has decreased from 43% in the past 12 months to 41% in the next 12 months. The decline is more pronounced among large companies (from 55% to 47%).
To foster integration between local and foreign workforces, 42% of businesses rely on cross-functional teams. Only one in five companies have diversity, equity, and inclusion (DEI) policies and are engaged in community or cultural integration activities.
“As we move into 2025, it is encouraging to see a growth in optimism on business outlook, reflecting our businesses’ resilience, adaptability and preparedness for the future by investing in capability building,” says Kok Ping Soon, Chief Executive Officer of SBF. “This survey, conducted before the US presidential election results, shows that many companies are already concerned with the uncertainty in demand arising from geopolitical forces. External factors such as increased trade tensions, potential tariff wars, and spillovers from regional conflicts are likely to dominate business concerns in the coming year.”
“While rising business cost is a perennial concern which needs to be addressed, we are heartened that more companies are prepared to invest in people, technology and new businesses. Given our manpower constraints, we need to increase Singapore’s absorptive capacity of a complementary foreign workforce to maintain our attractiveness as a global talent hub. With only one in five businesses having DEI policies and providing community or cultural integration activities, businesses can do more to integrate locals and foreigners at the workplaces,” adds Mr Kok.
Businesses remain focused on future growth despite current challenges
© 2024 Institute of Singapore Chartered Accountants
