Rising business costs have become the top concern for companies in Singapore, with 80% of respondents in a recent survey flagging it as a major challenge—up from 65% a year earlier.
The Singapore Chinese Chamber of Commerce and Industry polled 540 local businesses between May and July. The results showed global uncertainty, weaker demand, and supply chain disruptions are also weighing heavily on operations. The conflict in the Middle East has added to the strain, leaving many firms struggling to adapt.
Profit expectations dip as costs climb
Despite the pressures, 78% of businesses surveyed still expect to remain profitable in 2026. More than half anticipate lower profits compared to 2025, reflecting cautious optimism amid ongoing challenges.
To manage expenses, companies are absorbing costs to maintain customer relationships, passing some increases to consumers, cutting internal spending, and exploring new markets. Diversification has become a key strategy, with Malaysia emerging as the top overseas market of interest, followed by Indonesia, China, Vietnam, and Thailand.
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Firms are also looking to Southeast Asia for growth, aiming to strengthen sourcing, procurement, and manufacturing in the region.
Government steps in with regulatory relief
In response to these challenges, the Singapore government is introducing measures to reduce regulatory burdens, particularly for small and medium-sized enterprises. At the annual Small and Medium Enterprises and Infocomm Commerce Conference, Minister for National Development Chee Hong Tat announced two upcoming changes to streamline approvals.
Medical clinic operators in commercial buildings currently need approval from both the Ministry of Health and the Urban Redevelopment Authority unless the total clinic space is under 1,000 square meters. Under the new rules, operators will only need Ministry of Health approval if the clinic space does not exceed 3,000 sq m or 20% of the building’s total commercial gross floor area—whichever is lower.
Similarly, businesses within Changi Airport’s development zone will no longer need separate Urban Redevelopment Authority approval when switching between commercial uses, such as converting a shop into a restaurant. The authority will authorize such changes upfront, subject to conditions, including prior approval from the Civil Aviation Authority of Singapore.
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Chee described the measures as part of a broader push to eliminate unnecessary red tape. The government also plans to encourage a pro-business approach across agencies, focusing on simplifying administrative processes to save time and resources.
The Inter-Ministerial Committee on Pro-Enterprise Rules Review, chaired by Deputy Prime Minister Gan Kim Yong, was launched earlier this year to identify and remove regulatory inefficiencies. The latest changes form part of that effort.
Singapore has adjusted its regulatory framework before to ease business operations. Previous reviews targeted licensing requirements, zoning restrictions, and compliance costs, often focusing on sectors where small and medium-sized enterprises are most active. The current push comes as firms face higher costs and slower demand, making regulatory relief more urgent.
AI adoption remains cautious
The survey also revealed businesses are taking tentative steps toward artificial intelligence, though adoption remains uneven. About 45% of respondents said they were experimenting with off-the-shelf AI tools, but many cited barriers to broader integration. Uncertainty over implementation, a lack of in-house expertise, and the cost of deployment were common concerns.
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The government is working with trade associations to help firms build digital capabilities, access AI tools, and upskill their workforce. Chee encouraged small and medium-sized enterprises to use existing resources, such as the SME Centres, which offer business advisory services and support for AI adoption.
SCCCI president Kho Choon Keng announced the formation of an international advisory panel at the conference. The group will provide members with strategic guidance on geopolitical and economic developments. It aims to build cross-border partnerships, particularly in Southeast Asia, China, and beyond.
For now, businesses are preparing for continued uncertainty, with cost pressures unlikely to ease soon. While the government’s regulatory adjustments may offer some relief, the broader economic outlook remains clouded by global tensions and shifting demand patterns.