Singapore suffered its worst economic recession on record in 2020 – contracting 5.4%. COVID-19 took a huge bite out of many business sectors, including aviation, tourism, F&B and retail, as well as foreign worker-concentrated sectors such as construction, marine and offshore.
While many businesses would have naturally suffered, the number of businesses that actually ceased in 2020 was generally lower than in 2019 and 2018. This isn’t just from an overview either – it was across nearly all business sectors, including the hardest hit ones.
Cessation Of All Business Entities By Industry in 2020
|Business Sectors||Businesses Cessations in 2019||Business Cessations in 2020||Difference in 2020|
|Transport & Storage||4,507||3,524||-22%|
|Food & Beverage||2,370||2,056||-13%|
|Information & Communications||4,138||4,739||15%|
|Financial & Insurance Services||3,247||2,933||-10%|
|Real Estate Activities||587||576||-2%|
|Professional, Scientific & Technical Activities||7,046||6,609||-6%|
|Administrative & Support Services Activities||2,368||2,092||-12%|
|Education, Health & Social Services||2,500||2,297||-8%|
|Arts, Entertainment, Recreation & Other Service Activities||2,901||2,480||-15%|
There were several high-profile closures in Singapore in 2020, including Robinsons, Topshop, Espirit, Sportslink, Bakerzin, Starker and others. Nevertheless, the statistics actually point to 9% fewer business closures in 2020 compared to 2019.
Perhaps slightly outside our expectations, many hard-hit sectors saw less business closures than those supposedly managing well in 2020. For example, Retail Trade had 11% less business closures; F&B had 13% less business closures; and Construction saw 14% less business closures. Meanwhile, the Information & Communication sector saw 15% more businesses closing in 2020.
So, Why Didn’t More Businesses Close Down In 2020?
#1 To Fight It Out
One logical reason could be to fight it out. Businesses that have painstakingly grown their brand and operations over years and even decades would not fold at the first sign of trouble. Of course, Singapore has also suffered and rebounded relatively quickly from many past recessions. The two most recent economic crises – the Global Financial Crisis (GFC) in 2008 and SARS in 2003 – were also relatively short-lived.
#2 Nearly $100 Billion Support Package Helping Singaporeans And Businesses
COVID-19 is an unprecedented global crisis. Hence, it’s no surprise that the Singapore government’s efforts were similarly unprecedented. Committing to a nearly $100 billion support package for Singaporeans and businesses.
Rather than handing this to individuals, businesses were prioritised instead. The rationale is that it would save jobs, and hence achieve the same outcome – putting money in the hands of ordinary employees. At the same time, it also keeps businesses open and staffed – putting them in a good position to ride on any recovery.
#3 Lowering Cost Of Employees
During the Circuit Breaker period, up to 75% of employees’ salaries for all Singapore businesses were paid for on the government’s tab. This scheme, the Jobs Support Scheme (JSS), is still ongoing till today and will run until at least September 2021 for the hardest-hit sectors.
On the other hand, businesses in sectors that were supposed to be managing well (rightly) received less support. Those that knew their business couldn’t cut it despite operating in a good sector, probably knew they should throw in the towel.
Struggling businesses could also throw manpower at any operational issues that they had. This is because the government introduced several jobs-related schemes that discounted the cost of hiring an employee. The SGUnited Traineeship and SGUnited Mid-Career Pathway Programme as well as the Jobs Growth Incentive (JGI) allowed companies the option of allocating artificially high numbers of employees to projects without having to cover the “real” business costs.
#4 Heavily Funding Business Loans To Allow Businesses To Continue Operations
While these may have allowed business to access funding and continue operations, businesses facing poor outlook are at an equally poor situation today but saddled with more debt.
#5 Too Simplistic To Say That Businesses In Affected Sectors Should See A Slowdown
Also, the latest version of SSIC Code classification has stopped differentiating between brick-and-mortar stores VS internet stores. This could explain why hard-hit sectors such as retail trade actually saw less businesses closing – as e-commerce was booming because of COVID-19 restrictions.
Similarly, while the Information & Communication sector should be one of the better performing ones, it was the only business sector in Singapore to see more businesses closing own in 2020 than 2019. Looking at companies classified under the Information & Communication SSIC Code, businesses such as book, directories and news publishers are within the sector. These businesses are being disrupted, and more so because of COVID-19. Movie, video, television and other production businesses are also classified within this sector – and it could not have been easy to continue business during COVID-19.
Number Of Businesses Actually Increased In 2020
Far from experiencing a lacklustre start-up scene in 2020, the statistics actually point to 3% more businesses starting up in 2020 compared to 2019.
Formation Of All Business Entities By Industry in 2020
|Business Sectors||Businesses formations in 2019||Business formations in 2020||Difference in 2020|
|Transport & Storage||2,970||2,924||-2%|
|Food & Beverage||2,985||3,285||10%|
|Information & Communications||6,777||6,629||-2%|
|Financial & Insurance Services||6,467||6,002||-7%|
|Real Estate Activities||691||631||-9%|
|Professional, Scientific & Technical Activities||10,572||9,976||-6%|
|Administrative & Support Services Activities||2,792||2,257||-19%|
|Education, Health & Social Services||3,213||3,130||-3%|
|Arts, Entertainment, Recreation & Other Service Activities||3,549||3,362||-5%|
Retail trade saw a 54% increase in the number of business entities started up. As discussed, this would like likely been driven by e-commerce businesses. Rather strangely, 10% more F&B businesses started were formed in 2020 compared to 2019, despite being seemingly devastated by COVID-19 restrictions.
At the other hand, despite being the better performing sectors, there were 7% less financial and insurance services businesses formed and 2% less information & communications businesses formed in 2020.
Will The “Party” Continue In 2021?
The situation in Singapore looked to be improving in early 2021 with up to 75% of employees able to return to work and vaccine developments were giving individuals and businesses an added boost.
However, it took a turn for the worse in May 2021. Since then, the situation has gotten from bad to worse. This may be the catalyst for many businesses to crack in 2021.
#1 Big Uncertainties For Businesses
More than 1 and a half year after COVID-19 first grabbed international headlines, many economies are still reeling from its impact. While some countries seem to have been able to contain it better or at least continue with it – Singapore is not one of them today.
Our country had been managing COVID-19 relatively well, and with international acclaim, up until about May 2021.
#2 Numerous False Starts From The Government
- Tightening safe management measures from 1 May 2021
- Going on “Heightened Alert” from 8 May 2021
- Going into Phase 2 (Heightened Alert) from 16 May 2021
- Easing into Phase 3 (Heightened Alert) from 14 June 2021; with further reopening on 21 June 2021
- Recalibrating the 21 June 2021 reopening
- Further easing of Phase 3 (Heightened Alert) measures from 12 July 2021
- Tightening Phase 3 (Heightened Alert) measures from 16 July 2021/19 July 2021
- Further tightening of Phase 3 (Heightened Alert) measures from 19 July 2021
- Return to Phase 2 (Heightened Alert) measures from 22 July
These are just a highlight of the announcements to ease and then tighten the situation since May 2021 (within less than 3 months). Going into specifics, you would be able to see why many businesses, especially those deemed higher-risk, will be confounded by uncertainties.
#3 Very Limited Government Support This Time Around
Coupled with this is the very clear indication that the government would not be supporting individuals and businesses on a similar scale as 2020. At every point of the tightening, JSS payouts continue to support affected businesses. But it has been extremely targeted. For example, despite 100% work-from-home being mandated currently, not all businesses are being supported with the JSS payouts.
#4 Statistics Point To More Business Closures
|Business Sectors||Businesses Cessations in 1st Half 2020||Business Cessations in 1st half 2021||Difference in 1st half 2021|
|Transport & Storage||1,893||1,623||-14%|
|Food & Beverage||1,045||1,186||13%|
|Information & Communications||2,432||2,734||12%|
|Financial & Insurance Services||1,520||1,750||15%|
|Real Estate Activities||302||280||-7%|
|Professional, Scientific & Technical Activities||3,411||3,683||8%|
|Administrative & Support Services Activities||1,056||1,219||15%|
|Education, Health & Social Services||1,166||1,290||11%|
|Arts, Entertainment, Recreation & Other Service Activities||1,237||1,370||11%|
There’s already been 7% more business closures in the first half this year compared to the same time last year. This immediately tells us that businesses are having a very different outlook.
If we looked even more closely at the statistics, January and February 2021 actually saw fewer business closures compared to January and February 2020 (when the full impact of COVID-19 hadn’t even hit yet). However, since March 2021, more businesses have been shuttering. The business entity cessations were also quite uniformed rather than concentrated on particular sectors.
Food and Beverage saw 13% more businesses ceasing operations, accommodation suffered too, seeing 19% more business shutting down, and even retail trade – where the argument was made earlier that the pivot to e-commerce could be a saving grace – saw 7% more businesses closing.
Bucking the trend, real estate activities, perhaps mirroring the strength of property prices, is seeing fewer businesses shut down. Transport & storage businesses is another sector seeing fewer business closures.
Join The DollarsAndSense Business Community
For more content that helps entrepreneurs, freelancers, and self-employed individuals and learn to build better businesses, join the DollarsAndSense Business Community on Facebook.