Singapore: More firms closing amid tough economy – 14 Aug 2017

  • The percentage of businesses and companies shutting down has increased in recent years amid a challenging economic environment, according to data compiled by the Ministry of Trade and Industry (MTI).
  • The increase in closures of businesses as well as companies was recorded across sectors but retail was one of the hardest hit, said the study, which made use of data from the Accounting and Corporate Regulatory Authority.
  • The data showed a slight pickup in the cessation rate of companies in recent years, from 7.3% in 2014 to 7.6% in 2015 and further to 7.8% in 2016.
  • “This could be due to the economic slowdown in 2015 and 2016 as well as ongoing economic restructuring,” said the study, which was contributed by MTI economist Reuben Foong and released 11 Aug 17, alongside the latest Economic Survey of Singapore.
  • Still, the cessation rate in 2016 came in below levels recorded in 2011 and 2012, “suggesting that the overall corporate health of companies has not deteriorated significantly”.
  • When it comes to businesses, however, cessation rates spiked over the last two years to reach 22% in 2016.
  • “This suggests that businesses may be more vulnerable to economic slowdowns than companies, as they likely have weaker balance sheets and may lack access to financing to tide over a period of slower economic growth,” the MTI study noted.
  • This could be the case for younger businesses, as a significant proportion of the businesses that ceased operations in 2015 and 2016 was less than two years old.
  • The data also showed that the increase in company closures in 2015 and 2016 was broad-based, with all sectors recording a larger number of exits in these two years.
  • In particular, the business services and wholesale trade sectors contributed the most to the overall increase in company cessation in that period.
  • Notably, the number of company closures in the retail trade sector also went up significantly, rising 20% per year on average in 2015 and 2016, higher than the 9.3% seen in 2014.
  • For businesses, while all sectors saw a rise in business cessation in 2015 and 2016, most of the increase in the period could be attributed to retail as well as transportation and storage.
  • The rise in business cessation in the retail trade sector “reflects the sluggish business environment faced by retailers in recent years, and also comes on the back of the spike in the number of new businesses formed in the sector in 2014”, the study noted.
  • Meanwhile, the increase in the number of transportation and storage businesses that shut down could be due to drivers providing private car-hire services leaving after trying out the sector.

External Link : http://www.straitstimes.com/business/economy/more-firms-closing-amid-tough-economy

14-Aug-2017


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