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Singapore: Businesses identify manpower and increased costs as core challenges for 2023

  • Jan 10, 2023

BUSINESSES hope Singapore Budget 2023 will support them in addressing costs (74 per cent), manpower challenges (57 per cent) and assistance in cash flow management (48 per cent), according to the Singapore Business Federation’s (SBF) latest National Business Survey 2022/2023.

Other areas of support required include help with the transformation and deepening of enterprise capabilities (38 per cent), support in obtaining credit (33 per cent) and helping businesses to internationalise (29 per cent), according to the more than 931 firms surveyed.

In terms of top challenges faced by Singapore businesses, these largely related to the increase in overall business costs and manpower.

Almost all of the companies (96 per cent) indicated that they continue to face manpower issues. These include rising manpower cost (75 per cent), attracting and/or retaining younger workers (51 per cent), new foreign manpower policies raising costs (48 per cent), limited pool of local high-skilled labour (47 per cent), and stricter policies that restrict the supply of foreign workers (43 per cent).

Their top cost challenges are wages (79 per cent), logistical costs (52 per cent), overall cost pass-through and procurement costs (48 per cent respectively), and utilities (45 per cent).

Meanwhile, business sentiments have improved for the second consecutive year since the pandemic.

More than half of the firms surveyed (52 per cent) said they are satisfied with Singapore’s business climate, compared with 23 per cent in 2020 and 37 per cent in 2021. They are also more upbeat about Asean, with 30 per cent indicating they are satisfied with the region’s business climate – compared with 17 per cent a year ago and 11 per cent in 2020.

For the next 12 months, 26 per cent said they expect the economy to worsen, compared with 13 per cent last year. Only 40 per cent of businesses expect the local economy to improve in 2023 – down from 47 per cent in 2021.

Almost all companies surveyed (97 per cent) said they expect inflationary pressures to continue into 2023. Close to a third (32 per cent) indicated that they have been negatively impacted by inflationary pressures.

As part of efforts to manage inflationary risks, businesses indicated they are implementing cost-saving measures (55 per cent), increasing prices of products/services (42 per cent) and renegotiating financial terms with their suppliers and customers (38 per cent).

Despite this, eight in 10 of the businesses said they are confident in the resiliency of their operations. Large companies (89 per cent) were somewhat more confident compared with their smaller counterparts (77 per cent).

“While business sentiments are generally on an upward trajectory post-pandemic, most Singapore businesses are approaching 2023 with greater caution on the back of heightened cost pressures and continued manpower challenges,” said Albert Tsui, SBF’s executive director of advocacy and policy division.

“Despite these, it is heartening to note that businesses remain committed to transforming and growing their business.”

In terms of how businesses are looking to drive business transformation, 71 per cent indicated that operational processes are very important, followed by customer service (70 per cent), and products and services innovation (70 per cent).

About 54 per cent said they have witnessed increased productivity, greater scope in optimising operations (48 per cent) and reducing operational costs (44 per cent) thanks to digital transformation efforts.

Separately, three in four have implemented environmental, social and governance initiatives in at least one area. The top areas are employee health and safety (81 per cent); as well as fair and equitable employee pay and rewards policy (71 per cent).

These companies indicated they are looking to do more in areas such as increasing sustainability in business supply chain (45 per cent); mitigating supply chain risks (43 per cent); inclusion and diversity in business (43 per cent); and contributing to communities (40 per cent).

In the future, companies plan to increase salaries (40 per cent), invest more in new technologies (32 per cent) and re-engineer business and operational processes (28 per cent).

Their top priorities are growing revenue (66 per cent), reducing costs (43 per cent) and ensuring positive cash flow (42 per cent).

The survey was conducted between Aug 29 and Nov 23 of 2022. Of the 931 companies, 83 per cent were small or mid-sized enterprises, and 27 per cent were large companies.

Source: https://www.businesstimes.com.sg/singapore/businesses-identify-manpower-and-increased-costs-core-challenges-2023