Higher costs, profit squeeze keeping more SMEs up at night: QBE survey
Compared with a year ago, more of them are also worried about the impact of artificial intelligence on business productivity and jobs
TWO-THIRDS of Singapore’s small and medium-sized enterprises (SMEs) cited increased costs and reduced profitability as the top business challenges in 2025, as indicated by the latest findings of an annual survey by insurance provider QBE Singapore. This was up from just half in 2024.
The survey polled 600 decision-makers on their views concerning various business risks and opportunities, including the impact of artificial intelligence (AI) and cyber risks, as well as their readiness for insurance digitalisation. It was conducted between December 2024 and January 2025.
Over half of the respondents reported reduced customer spending and financial challenges, compared with 40 per cent the year before.
Similarly, just over half of the respondents said they were experiencing difficulties when it came to company finances – such as managing cash flow and access to funding – up from 36 per cent the year before.
The survey also found that SMEs’ economic outlook for the next 12 months was less positive than a year ago. Only 52 per cent of respondents expect 2025 to be better than the past 12 months, versus 60 per cent in 2024.
Factors expected to have a negative impact on the economy were rising operating costs (70 per cent), followed by rising inflation and a goods and services tax hike (60 per cent).
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In terms of business performance, 55 per cent of respondents expect to achieve better sales in 2025, down from 62 per cent the year before.
However, the survey also pointed out that a greater proportion of respondents were “taking action” to tackle the increasingly challenging business conditions.
This includes respondents engaging in cost control moves (70 per cent), diversification of customer bases (49 per cent), and streamlining of business operations (40 per cent) “to ensure business viability”, it noted.
“While there is much concern over the state of the economy and their own prospects in the future, businesses aren’t standing still,” said Goh Shun Quan, head of underwriting, retail and SME at QBE Singapore.
Concerns over artificial intelligence
Regarding AI, 52 per cent of respondents cited the technology as having a “significant impact” on business productivity, up from 49 per cent a year ago.
While the survey noted that respondents were “upbeat about the current and future trajectory of AI”, more of them also flagged risks associated with the technology.
Some 34 per cent of respondents said AI presented a threat to business activity, up from 30 per cent the year before. Meanwhile, more than two-thirds of respondents viewed AI as a threat to their jobs, up from 17 per cent last year.
On that note, about one-quarter of SMEs expect jobs in customer service, finance and accounting to be fully replaced by AI within three years; 22 per cent expect roles in routine manual work and labour-intensive tasks to be fully replaced after six years.
AI-related privacy concerns were also raised by respondents, with more than two-thirds saying they are bothered by this, compared with just 10 per cent the year before. Over half said they are anxious about AI-linked security breaches, compared with 15 per cent the year before.
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