Smaller firms here are increasingly optimistic about their business prospects, with expectations that improvements in the wider economy will filter through to them next year.

The positive mood is reflected in a new survey that showed business sentiment for the next six months has risen across the board, lifting an index on business outlook from 50.6 to 51.2. A score above 50 indicates expectation of growth, while one below 50 signals possible contraction.

Small and medium-sized enterprises (SMEs) in the business services sector recorded the highest level of optimism, with an index score of 52.1 in the Singapore Business Federation - DP Info survey.


This was likely buoyed by increased economic activity from other sectors driving up demand. Business services support many other industries, providing a diverse range of functions such as real estate, engineering, management consultancy, legal and accounting.

The next two best performers were manufacturing and commerce/trading, with a score of 51.

Construction and engineering, which recorded 49.9 in the previous quarter, registered a positive score of 50.4. The expectation of a stronger pipeline of public-sector projects and the launch of the Industry Transformation Map for the construction sector have added to the sector's positive outlook, according to the report.

SBF chief executive Ho Meng Kit said: "SMEs' business sentiment has been deteriorating over the past three years, so this latest survey that SMEs across all sectors are feeling positive about their outlook for next year is welcome news."

The survey also had a breakdown of different components of the index. Turnover expectations rose from 5.01 to 5.15 across all industries, while profitability expectations also went up, from 4.86 to 5.1. A score above five indicates sentiment that turnover and profits are expected to increase, while a score below that points to possible declines.

Business expansion expectations also continued to stay strong with a score of 5.55, as SMEs look for new opportunities to grow their business and generate more value. Access to financing expectations went up from 5.01 to 5.13, with improvements observed across all sectors.

The capacity utilisation score rose from 6.81 to 7.11. A score over seven indicates SMEs are operating at or near their full capacity. The report said they are increasing their output and gearing up operations in anticipation of greater demand in the coming year.

Capital investment was the only component that faltered, declining from 5.28 to 5.14. However, the report said many SMEs may be holding back new capital expenditure as they await next year's Budget.

Mr Ho urged SMEs to "ride on the tailwind of better times ahead to undertake serious effort to transform their companies". "There is a long tail of SMEs which need to embrace digitalisation, improve their management so that they can be more innovative and competitive. Good times ahead have not eroded this urgent need for change."

More than 3,600 SMEs were surveyed during October and November on their outlook.