Singapore – Despite a tough year for small and medium-sized businesses in the year of the pandemic, SMEs in APAC are showing higher confidence that enterprise will slowly come back on its feet this 2021, new report by CPA Australia showed.
A survey record low of 46.2 percent of small businesses in the region grew in 2020, down from 65.8 percent in 2019. Further reflecting the challenging environment, 31.3 percent of businesses shrank last year, more than double the 14.5 percent that shrank in 2019.
This year, the survey shows that small business confidence is beginning to return, with 60.8 percent expecting to grow this year, which is noticeably higher than the 46.2 percent that grew last year.
However, for most businesses, it won’t be an immediate return to their pre-COVID-19 level. Only 14.5 percent have already returned to their pre-pandemic levels, while 58.4 percent expect to return to their pre-pandemic levels over the next two years.Â
According to the study, optimism is most apparent in India, where a significant 86.7 percent of small businesses expect to grow this year, up solidly from 2020. Meanwhile, Hong Kong’s small businesses is the least optimistic, where only 21.2 percent expect to grow, with 49 percent expect to shrink or shut down this year.Â
The optimism is chalked up to the expected job creation by small businesses. About 36.1 percent of the region’s small businesses expect to add employees this year.
The poor growth that resulted in 2020 was reflected in higher job losses in the sector, where businesses resorted to retrenchments and downsizing amid the halted operations brought by the lockdowns and closure of borders. In 2020, 14.7 percent of small businesses reduced employee numbers, compared with 6.7 percent in 2019. However, job losses were lower than expected because many governments in the region introduced wage subsidy schemes, like Australia’s JobKeeper, Singapore’s Jobs Support Scheme, and Hong Kong’s Employment Support Scheme.
The report said that innovation along with job creation is what will spur the recovery of businesses. The study saw that younger businesses and businesses from developing markets are more likely to be innovative. This year, the percentage of businesses that are expected to innovate is down slightly from expectations for last year – 23 percent will innovate in 2021 compared to 25.8 percent in 2020. In India, the large jump in the percentage of businesses that will innovate reflects well on its small business sector and government policies encouraging innovation.
What the report found that will stimulate growth the most are five things: selling online, innovating, improving business strategy, investing in technology, and improving customer satisfaction.
Due to limited physical activity and in-person engagements, the period of the pandemic saw small businesses increasing their adoption of technology and finally digitizing their operations. In 2020, 57.9 percent of businesses received more than 10 percent of revenue from online sales, up from 51 percent in 2019.Â