Export-dependent SMEs fare the worst as 2017 profits nosedive 53.8%

The manufacturing slowdown and higher operating costs derailed its growth.

As the profits of SMEs plummeted in 2017, export-dependent services like transport and storage companies took the largest hit out of all small businesses in Singapore after the sector’s total profits plunged 53.8% whilst combined turnover fell 24.6%, according to a report from DP Experian. 

The sector reportedly grappled with one of their most challenging financial periods as they operated amidst less-than-ideal business conditions. “There was a slowdown in manufacturing from 2015 which impacted demand for shipments in the following year (2016). This has contributed to the reduction in the transport/storage sector’s top line,” Experian General Manager, Credit Services & Strategy SEA James Gothard told Singapore Business Review.

Operating costs also rose over the same period, further putting the sector in the red against an overall background oil price recovery and continued investments in automation and productivity-led technology.

It was a bad year all around for SMEs whose business performance is intricately linked with international trading conditions as the commerce-wholesale sector also registered 17.8% decrease in combined turnover and 22.7% decline in profits.

“Many SMEs struggled against factors beyond their control including slow GDP growth, weak global trade and the need to invest in technology and productivity improvements in response to manpower restrictions,” said Gothard. 

Export-dependent services prop up Singapore’s economic growth prospects as exports account for a whopping 173% of GDP in 2017.

However, a recovery is on the horizon for the battered sector amidst improving regional trade. “Our quarterly SME study – the SBF-DP SME Index – shows an expected recovery for the trading and manufacturing sectors which will have a positive follow-on effect for the transport/storage sector in the mid-term,” Gothard added.