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Rising costs, competition top list of SME concerns

Annual poll shows firms are squeezed by higher wages, input costs, rents

RISING business costs have overtaken staffing issues as one of the top hurdles faced by small and medium-sized enterprises (SMEs), an annual survey has found.

Stiff competition, a perennial worry, is the top concern, but escalating costs were the next biggest worry cited by firms polled in the latest SME Development Survey.

Amid strong economic growth, firms feel squeezed by climbing wages, followed by higher prices for raw materials and other inputs, as well as steeper rents.

Three out of five SME bosses cited rising wages as their biggest headache among cost components.

About half faced rising input prices while 37 per cent were concerned about steeper rents.

The findings were unveiled yesterday by DP Information Group, which conducted the poll, with partners Spring Singapore and IE Singapore. The exercise was supported by the Infocomm Development Authority of Singapore.

More than 1,200 SMEs took part in the survey, now into its fifth year.

This year, six out of 10 firms listed competition as their greatest worry, compared to 45 per cent last year.

But next on the list came rising cost pressures.

A total of 53 per cent of SME bosses this year said this was a major headache, up from just one-third last year, making it the fastest-growing SME concern.

‘With a strong economy, low levels of unemployment and demand for labour rising, it is to be expected that SMEs need to pay more to attract the right people,’ said DP Info managing director Chen Yew Nah.

‘The boom in China and India also fuelled the demand for raw commodities, with rising prices being felt across all industries,’ she added.

Among those most affected by rising wage costs are firms in the construction, services and food and beverage industries, the survey showed.

At the same time, however, SMEs polled are also gaining from the buoyant economy, with more firms reporting turnover growth of more than 10 per cent, and fewer businesses suffering losses.

Despite a tighter labour market, 68 per cent of firms surveyed said they pay the market average for salaries and staff benefits, and 16 per cent claim to pay ‘above-market rates’. Still, more than half of the SMEs polled reported problems hiring workers for roles from operational to managerial.

Meanwhile, worries about finding business opportunities and getting funding have taken a back seat this year.

More firms are growing their business by expanding abroad – with 70 per cent of respondents doing business overseas, up from 59 per cent last year.

The proportion of SMEs which reported problems finding new financing has fallen to 10 per cent, from 19 per cent last year.

‘There have been major improvements in the ability of SMEs to access funding, reflecting the responses of the banks and the Government to the needs of SMEs,’ said Ms Chen.

‘At Spring Singapore, we listen closely to our SMEs to gain insights into their challenges, issues and aspirations,’ said deputy chief executive Png Cheong Boon, outlining a series of public initiatives to improve SMEs’ access to money, markets, management skills and know-how.

There are about 148,000 SMEs in Singapore, making up 99 per cent of all enterprises and providing six in 10 jobs.

 Rising Cost

 

Source: The Straits Times 21 Sept 07

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