The Singapore Business Federation (SBF) released findings from a new business poll, highlighting that two in three Singapore businesses have been moderately to severely affected by the ongoing Middle East conflict, as rising energy and logistics costs affect operations and demand. While firms are actively managing costs and pivoting strategies, the findings point to a widening gap in how businesses are coping, with small and medium-sized enterprises (SMEs) facing sharper disruptions and expressing significantly lower confidence compared to larger firms.
WIDESPREAD IMPACT WITH SMES FACING GREATER STRAIN
The poll results, released on April 22, reveal that the impact of the conflict is being felt across multiple cost and demand channels, with the most affected areas being energy prices (66%), shipping and freight costs (54%), and customer demand (48%). While half of large companies reported a moderate impact, SMEs are experiencing more acute challenges, with one in three reporting significant to severe disruptions. Large firms also reported higher exposure to insurance and security-related costs (42%), compared to SMEs (17%), highlighting differences in risk exposure across firm sizes.
SMES LESS CONFIDENT IN MANAGING ONGOING VOLATILITY
This disparity in impact (between firms of different sizes) has created a stark confidence gap. While 78% of large firms have expressed confidence in managing the ongoing volatility, only 36% of SMEs feel the same. Furthermore, 54% of all businesses remain very or extremely concerned about their long-term viability if current conditions persist beyond the next six months.
Despite these headwinds, Singapore businesses are taking active steps to adapt. One in two firms has already raised prices or renegotiated contracts. SMEs are prioritising cash conservation (40%) while large firms with more resources and capabilities are undertaking sophisticated risk management, including fuel and foreign exchange (FX) hedging (33%), and accelerating investments in energy efficiency (17%).
HIGHER CIT REBATE WELCOMED; ADDITIONAL MEASURES REQUESTED
Businesses are making a strong call for more targeted assistance to cope with sustained cost pressures and uncertainty. Top asks include working capital support (41%) and logistics cost management (35%). Among the measures to help businesses announced in Parliament on April 7, the Corporate Income Tax (CIT) Rebate was cited as delivering the strongest immediate value (60%). This was followed by the Energy Efficiency Grant (43%) and support to defray cost increases in government projects (31%).
SUMMARY OF KEY FINDINGS
- Rising costs: Some 62% of businesses reported moderate to significant increases in operating costs, driven by higher energy prices, logistics expenses, and the cost of goods and services. Energy remains the most significant cost driver, with 28% of businesses experiencing a significant increase. While SMEs are more affected by rising costs (62%) than large firms (52%), the poll reveals that large firms experienced greater impact (36%) in energy costs compared to SMEs (27%).
- Cash flow strain: Higher energy (58%), freight costs (55%), and increased inventory requirements (33%) are exerting pressures on cash flow. SMEs are more affected by rising labour costs (35% versus 17% for large firms), while large firms show greater sensitivity to FX volatility (39% versus 24% for SMEs), reflecting differences in operational structure and global exposure.
- Revenue disparity: More than half of SMEs (56%) reported a decline in revenue from Singapore customers, compared to 33% of large firms. In contrast, 21% of large firms reported revenue growth, compared to 5% of SMEs. This divergence suggests that larger firms are, in some cases, better positioned to adapt to shifting market conditions, while SMEs continue to face more sustained revenue pressure.
- Supply chain disruptions: Operational disruptions remain widespread across the business landscape. Half of the firms reported longer shipping lead times, one in three experienced more frequent delivery delays, and one in four faced supplier fulfilment issues. Despite this, 28% of businesses reported no operational impact, indicating uneven effects.
- Short-term cost management is a key priority: In response to these pressures, businesses are actively implementing cost management and risk mitigation strategies. One in two firms have raised prices and renegotiated contracts or delivery terms with customers. SMEs are more likely to focus on conserving cash (40%), while large firms tend to adopt hedging strategies against fuel and FX risks (33%). In addition, large firms are more inclined to accelerate investments in energy efficiency (17%), compared to SMEs (4%), reflecting differences in capacity and long-term planning.
- Confidence gap: Confidence levels vary significantly across firm segments. While 78% of large firms reported being “somewhat to very confident” in managing ongoing volatility, only 36% of SMEs expressed similar confidence. Some 54% of businesses remain “very to extremely concerned” about business viability if current conditions persist over the next six months. While larger firms may feel better positioned to manage volatility, prolonged uncertainty continues to pose risks to both SMEs and large enterprises.
- Support needs: Businesses have identified working capital support (41%), logistics cost management (35%), and temporary relief for energy-intensive firms (32%) as the most helpful forms of assistance over the next six months. While large firms are placing relatively greater emphasis on logistics support, supplier diversification, and supply chain risk advisory services, SMEs are showing stronger demand for financial and cash flow assistance.
- CIT rebate most welcomed: Businesses perceive tax-related measures as the most useful form of support, with 60% of firms identifying the CIT rebate as delivering the strongest immediate value. This is followed by the Energy Efficiency Grant (43%), and support to defray cost increases in government projects (31%).
- Differing support priorities for SMEs and large firms: While SMEs place greater emphasis on financial and cash flow support measures, large firms prioritise support related to participation in government projects. Businesses continue to call for measures to address fuel and energy costs across both segments.
