Business confidence in Singapore declined further in the third quarter of 2025, signalling a more cautious 2026 outlook as companies face persistent global uncertainty and rising operating costs.

The Singapore Business Federation’s National Business Survey 2025 – Annual Business Sentiments Edition shows the Business Sentiment Index (BSI) dropping from 55.4 in Q2 to 52.2 in Q3. The 3.2-point fall is significantly sharper than the 1.1-point dip recorded earlier in the year, indicating a sustained weakening in sentiment.

The survey also finds that expectations for Singapore’s economic performance remain subdued. Thirty-seven per cent of companies expect the economy to worsen over the next 12 months, while only 14 per cent foresee any improvement. This imbalance reflects continued caution among businesses as they weigh the impact of global conditions on domestic activity.

Confidence levels differ widely across industries. Banking & Insurance, Other Financial & Insurance Activities, and Construction & Civil Engineering remain comparatively positive. In contrast, Hotels, Restaurants & Accommodations (HRA), Retail Trade, and IT & Related Services show weaker sentiment.

Profitability expectations have deteriorated, registering 48.5 on the index — a 2.9-point decline from Q2. SMEs are notably more pessimistic than larger companies. Twenty-two per cent of SMEs express dissatisfaction with current conditions, compared with 15 per cent of large firms. Looking ahead, 38 per cent of SMEs expect conditions to worsen in the next year, versus 34 per cent of large companies.

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Differences also emerge across sectors. Firms in Retail Trade and HRA expect the next 12 months to be more challenging, while a larger share of companies in Administrative & Support Services, Banking & Finance, and Wholesale Trade anticipate improvements.

Tariff concerns ease, but global sentiment weak

Concerns over US tariffs have moderated since the initial reaction in April. Negative assessments dropped from 81 per cent to 57 per cent by October 2025. The share of businesses reporting no significant impact increased from 15 per cent to 41 per cent.

Despite this improvement, dissatisfaction with the global business climate remains high at 33 per cent, compared with 14 per cent who are satisfied. Businesses are more optimistic about ASEAN, where 22 per cent report satisfaction with conditions.

This suggests regional markets continue to provide opportunities amid broader global weakness.

Manpower cost remains the top business challenge, cited by 63 per cent of respondents. Customer demand uncertainty (44 per cent) and rental cost (40 per cent) also rank high.

Cybersecurity and data-privacy risks have grown in prominence, rising to 36 per cent and entering the top five concerns. These risks are reported most frequently in HRA, Banking & Insurance, and Other Financial & Insurance Activities.

Sector-specific challenges continue to shape business responses. Manpower availability has the highest impact on HRA and Health & Social Services. Foreign workforce policies affect Construction & Civil Engineering and HRA firms most strongly.

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Retail Trade companies report the most significant concern over training staff to adapt to new technology, while Banking & Insurance companies highlight employee skills as a key issue.

Profitability pressures remain widespread. Only four per cent of firms report increased profitability over the past year, while 34 per cent experienced declines. Rising manpower, rental and logistics costs are the main contributors. Utilities are a top cost concern for SMEs, while large companies point to raw-material price volatility as a significant factor.

Strategic priorities shift ahead of the 2026 outlook

In response to these pressures, businesses are adjusting their priorities for the coming year. Increasing employee salaries (39 per cent), investing in new tech (33 per cent), and expanding into overseas markets (30 per cent) are among the top intentions. The most substantial increases are in overseas expansion, business process re-engineering, and supply chain diversification.

Revenue growth and cash flow management remain the most important goals for the next 12 months, at 65 per cent and 49 per cent, respectively. More companies are now focused on securing new business opportunities, overtaking talent-related priorities such as staff retention and training.

SBF Chief Executive Kok Ping Soon said businesses remain cautious about the 2026 outlook, despite reduced concerns over US tariffs. He cited manpower costs, external demand uncertainty, and rental pressures as key challenges and noted that companies are calling for support in Budget 2026 to manage costs, strengthen cash flow, and invest in workforce development.

He said SBF will continue working with companies and the government to help maintain Singapore’s attractiveness as a business hub.

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