Survey: Singapore businesses under pressure from Middle East shocks, SMEs hit harder

Amid the ongoing Middle East conflict, about two-thirds of Singapore businesses have been "moderately to severely" impacted, with SMEs bearing the brunt and significantly trailing large firms in confidence to navigate uncertainties.

The latest survey released by the Singapore Business Federation (SBF) shows that rising energy prices, increased shipping and logistics costs, and weaker demand are the top three pressure sources businesses face.

SBF noted that affected firms span various industries, given Singapore's highly open economy.

66% of surveyed firms cited energy costs as the most impacted, followed by shipping and freight costs (54%) and customer demand (48%).

The impact varies by firm size. About half of large firms feel moderate impact, while one in three SMEs reports significant to severe disruption.

SMEs are more affected by overall rising costs (62%), compared to 52% for large firms. However, energy costs impact large firms more significantly (36%) than SMEs (27%).

Over half of SMEs saw revenue declines, higher than the one-third ratio among large firms.

The survey also reveals a marked confidence gap. 78% of large firms express confidence in navigating ongoing volatility, while only 36% of SMEs share the same view. If the situation does not improve in six months, 54% of firms are "very" or "extremely" concerned about their ability to sustain operations.

Despite the challenging external environment, businesses have generally taken countermeasures. About half have raised prices or renegotiated contract terms.

SMEs are more inclined to prioritize cash preservation (40%), while larger firms with more resources adopt more sophisticated risk management approaches, including fuel and currency hedging (33%), and accelerating investment in energy-saving measures (17%). SBF pointed out that SMEs have relatively limited resources, making it difficult to widely use such tools, rendering them more vulnerable in the current environment.

The survey was conducted from April 8 to 14, collecting responses from 254 firms.

Firms call for more targeted government assistance

Most firms welcome the recent government aid measures. However, they call for more targeted support: 41% seek working capital support, and 35% hope for assistance with logistics costs.

SBF Executive Director Guo Bingxun noted that the survey shows a widening confidence gap between SMEs and large firms.

"Large firms are better positioned to cope with rising costs, but SMEs face greater pressure from energy and logistics volatility. Businesses have already managed risks through supply chain diversification and currency hedging, while also expecting more support from the government in working capital and logistics costs."

Separately released OCBC Bank's first-quarter SME index shows that despite the Middle East shocks, overall SME activity remained expansionary in Q1, with the index reading 51.6—the highest in over three years—staying above the 50 threshold for four consecutive quarters and rising for two consecutive quarters.

OCBC Global Commercial Banking Head Wang Yinxuan said that while the index maintained expansion in Q1, the business outlook survey indicates that owner confidence has weakened amid Middle East geopolitical tensions driving up energy, freight, and operating costs.

She said: "Although most SMEs have limited direct exposure to the Middle East, and business dealings remain largely resilient, if tensions persist, cost pressures may continue and drag on business activity in the coming months."

OCBC conducted the survey among SME owners from March 2 to 31, collecting about 800 responses.