SINGAPORE businesses have grown more cautious about their outlook compared to a year ago, as rising costs remained a top challenge for firms in 2024, according to the Singapore Business Federation’s (SBF) latest National Business Survey 2023/2024 released on Friday (Jan 5).

Business sentiment has weakened compared to a year ago, with just 25 per cent of firms confident that the economy will improve in the next 12 months, compared to 41 per cent in last year’s survey.

Specifically, more small and medium-sized enterprises (SMEs) (30 per cent) believe that the economy will worsen in the next year compared to large companies (22 per cent).

The survey was conducted by SBF between Sep 14 and Nov 12, 2023. Of the 1,056 companies polled, 82 per cent were SMEs while 18 per cent were large companies.

On a sectoral level, businesses in IT and professional services and manufacturing had a more bearish outlook, while those in construction and civil engineering; banking and insurance; and logistics and transportation were more optimistic.

Rising costs were cited as the top challenge (58 per cent) faced by businesses. This was followed by availability of manpower (53 per cent); manpower retention (42 per cent); foreign workforce policies (39 per cent); and rent (36 per cent).

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To better attract and retain local talent, businesses are prioritising the following measures: providing competitive salary and benefits packages (72 per cent); professional development and training (43 per cent); and providing hybrid work options (35 per cent).

Meanwhile, on foreign labour, six in 10 businesses said they faced foreign manpower challenges, with more firms citing the changes to the S Pass (70 per cent) and the Employment Pass qualifying salaries (65 per cent) as top concerns, compared to 2022.

More than eight in 10 businesses were impacted by interest rate hikes and increases in funding costs in the past year, while almost half faced a “slight to severe credit crunch”. On this front, 11 per cent of firms said they did not have sufficient cash to operate. This was up from 6 per cent previously.

Firms were also polled on their top priorities for the year. The top three priorities cited by both SMEs and large companies were growing revenue (76 per cent); reducing costs (62 per cent) and ensuring positive cash flow (59 per cent).

While a majority of firms understood the importance of business transformation, they faced roadblocks in terms of costs, expensive licensing payments, the need to upskill staff to keep up with new technologies as well as a lack of management expertise.

Firms were also concerned about cybersecurity (45 per cent); emerging technologies like artificial intelligence (35 per cent); and increased expectations on environmental, social and corporate governance (34 per cent).

On the internationalisation front, businesses have scaled back on future international expansion plans, with 57 per cent keen on going abroad, down from 65 per cent a year ago.

Top concerns in this area included the unpredictability of overseas market demand and the complexities of the geopolitical landscape.

But for those which plan on expanding abroad, the top three countries were Malaysia (29 per cent), Vietnam (28 per cent) and Indonesia (28 per cent).