Why Singapore’s mid-tier enterprises face the toughest transition with Budget 2026

BUDGET 2026 has largely been described as measured and predictable, with an emphasis on continuity rather than dramatic policy change.

However, as underscored during the parliamentary debates last week, this characterisation risks overlooking a more consequential shift in how business support is being structured, and how that shift may affect different segments of the business landscape.

At its core is a gradual but deliberate move towards more targeted capability-building incentives. As Prime Minister Lawrence Wong noted in his round-up speech, while the government will seek to provide flexibility where needed, “ultimately, the sustainable path forward is productivity improvement and business transformation”.

These signals suggest that support is increasingly designed to accelerate structural upgrading rather than merely buffering immediate pressures.

In addition to broad-based relief, we are seeing more targeted transformation incentives to encourage mid-sized enterprises to make substantive changes now.

Mid-sized firms – those with 50 to 200 employees – are most exposed to this shift. They have moved beyond the scale of micro and small businesses, but lack the organisational depth and resources of large corporations.

These “sandwiched” enterprises are often too large for broad stabilisation measures, yet lack the capital depth, specialist talent and implementation capacity to fully leverage transformation incentives.

In this sense, Budget 2026 is less about stabilising the business landscape and more about reshaping it. It points to a more competitive policy environment in which mid-tier firms may face the steepest adjustment pressures, while agile organisations pull further ahead.

This shift not only reflects a rational evolution in policy as Singapore’s economy matures, but it also raises important questions about how mid-sized enterprises can be supported through this transition.

From broad support to targeted transformation

Several measures in Budget 2026 illustrate this evolution. The Enterprise Innovation Scheme now includes artificial intelligence (AI) expenditure, allowing 400 per cent tax deductions on up to S$50,000 of qualifying expenditure annually.

The Productivity Solutions Grant has also expanded to cover a wider range of digital and AI-enabled tools. These measures are designed not simply to encourage experimentation, but also to support firms in integrating advanced technologies into core operations.

However, the impact could be uneven. Firms with the organisational readiness, leadership commitment and resources to implement transformation are better-positioned to leverage these incentives effectively. Those lacking this readiness will find it more challenging to translate available support into performance.

Strategic execution will matter most

For businesses, the challenge is no longer the availability of support, but the ability to use it effectively.

Many firms are aware of available schemes, yet far fewer have the internal clarity, leadership alignment or operational readiness required to translate incentives into meaningful transformation.

Technology adoption is rarely constrained by funding alone. According to the Infocomm Media Development Authority, only 14.5 per cent of small and medium-sized enterprises in Singapore had adopted AI as of 2024, compared with 62.5 per cent of larger firms. This gap reflects structural differences in the ability to integrate new technologies into core processes.

Even adopters face execution challenges. PwC’s latest Global CEO Survey found that only about one-third of companies have reported increased revenues from AI investments, while many struggle to scale experimentation into sustained operational improvements.

These patterns highlight operational readiness as a common underlying constraint. Many firms lack in-house expertise, clear implementation pathways and the ability to integrate new technologies into existing workflows.

Consequently, the firms most likely to benefit from Budget 2026 will be those that can execute transformation programmes with discipline and speed. This requires clear strategic priorities, defined implementation road maps and the capability to drive change across the organisation.

For mid-sized enterprises, the challenge is particularly acute, as they must balance day-to-day operational demands with the need to invest in long-term capability development.

A shift in expectations

Budget 2026 signals a clear evolution in the role of economic support towards more targeted incentives to drive innovation.

Competitiveness depends less on expanding baseline capabilities and more on accelerating firms that can adopt new technologies, scale innovation and adapt quickly to changing global conditions.

In this environment, policy functions as a catalyst for upgrading, rather than as a buffer against market pressures. While incentives can accelerate transformation, they cannot substitute for organisational readiness or leadership execution.

Ultimately, Budget 2026 marks a shift in expectations. The government can optimise the fiscal environment for transformation, but the responsibility for sustaining competitiveness rests with businesses themselves.

For mid-sized enterprises, this represents a critical inflection point. Firms that recognise this shift and act decisively are likely to strengthen their competitive position, while those that delay may find the gap progressively harder to close.

The writer is markets leader at PwC Singapore