Organisations in Singapore turn cautious as costs climb and talent pressures intensify

Singapore’s business community is entering 2026 with heightened caution as new findings from the Singapore Business Federation’s (SBF) National Business Survey 2025 revealed weakening sentiment amid rising costs, volatile global conditions, and persistent talent challenges. Overall business confidence, measured by the Business Sentiment Index, fell from 55.4 in Q2 2025 to 52.2 in Q3, marking a sharper drop than the previous quarter and signalling growing unease around profitability and longer-term stability.

Organisations remain wary about Singapore’s economic outlook over the next 12 months, with more than a third expecting conditions to worsen and only a small minority anticipating improvement. This cautious stance reflects the pressure organisations are facing across both domestic and global markets as they grapple with ongoing tariff uncertainties, sluggish global demand, and continued cost escalation.

Sentiment is markedly uneven across sectors and company size. Organisations in banking, finance, and construction remain comparatively upbeat, while those in hospitality, retail, and IT services are far more pessimistic as they contend with softer consumer demand and tighter margins. Small- and medium-sized enterprises (SMEs), in particular, feel the strain more acutely than larger organisations, with nearly four in 10 expecting a deterioration in business conditions over the coming year.

Despite earlier concerns around US tariffs following Liberation Day in April, anxiety has eased considerably. The proportion of organisations reporting negative impact from tariffs has fallen from 81% earlier in the year to 57% in October. Yet this moderation has not translated into optimism about the global business climate, where dissatisfaction continues to outweigh positive views. Regional markets, however, offer a comparatively brighter outlook, with organisations expressing greater confidence in ASEAN as a source of growth and resilience.

The survey reinforced the continued dominance of manpower costs as employers’ top concern, followed by uncertain customer demand and rising rental expenses. Cybersecurity and data-privacy risks have become increasingly prominent and now rank among the key challenges—particularly for organisations in hospitality, banking, and financial services. Sector-specific worries also continue to shape business strategies: health and social services operators cite manpower availability as their biggest pain point, while retain firms struggle to equip employees with the skills needed to adapt to new technologies. In the financial sector, concerns around employee skill levels highlight persistent pressures on workforce readiness and talent development.

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Profitability remains under significant pressure, with only a small fraction of organisations reporting improvements over the past year. Rising manpower, rental, and logistics costs continue to weigh heavily on balance sheets. SMEs note utilities as an additional source of strain, while larger organisations point to volatility in raw materials prices.

Against this backdrop, organisations are shifting their priorities as they plan for the year ahead. Employers are focusing more intensively on raising salaries, investing in new technologies, and expanding overseas. Intentions to diversify supply chains, re-engineer processes, and explore new markets have also strengthened, underscoring a broader push towards future-proofing operations. While revenue growth and cash flow management remain top priorities, the survey revealed a notable shift away from talent-related goals such as employee retention and training, as organisations concentrate instead on commercial resilience and discovering new opportunities.

Ahead of Singapore’s Budget 2026, organisations are calling for more robust support to manage rising costs, develop the local workforce, and strengthen cash flow. Employers are also seeking greater assistance in capability development, from strategy and financial planning to human capital enhancement, to navigate increasingly complex global and domestic challenges.

Kok Ping Soon, Chief Executive Officer of SBF, noted that organisations are operating “under persistent cost pressures” and remain cautious about the year ahead. He added that while concerns around US tariffs have eased, manpower costs, external demand uncertainty, and rental pressures continue to weigh on organisations. “It reflects their desire to maintain resilience while investing in capability building,” he said, adding the SBF will continue to work closely with the government to strengthen Singapore’s competitiveness as an enterprise hub.