SME business confidence plummets in Q2 2022 amidst fifth wave

If the fifth wave continues, 46% of SMEs expect their businesses to last for 6 months at most.

Overall business confidence of local small and medium enterprises (SMEs) has plummeted in the second quarter of 2022 as Hong Kong continues to grapple with the fifth wave of the pandemic, the Standard Chartered Hong Kong SME Leading Business Index revealed.

Based on the report, Hong Kong's overall index dropped from 12.4 to 35.7, showing a strong decline in business optimism.

All sub-indices all dropped below 50 which is considered the neutral mark. The most significant decline was recorded in the "Global Economy" index which dropped to 23.8.

Amongst the three major industry indices,  “Retail” suffered the biggest decline of 14.8 to 31.2, followed by "Manufacturing" which fell from 11.3 to 33.6, and  “Import / Export Trade & Wholesale” (9.6 to 35.9).

According to the report, 76% of SMEs suffered a decline in their respective incomes, whilst 46% had to temporarily suspend their businesses or expected their businesses could only last for 6 months at most due to the fifth wave.

The most affected industries were "Social and Personal Services", "Retail" and "Accommodation and Food Services," the report said.

Due to the impact of the fifth wave, 18% of SMEs said they will decrease overall investments in the next quarter.

In particular, SMEs would reduce investment in inventory (43%), offline marketing promotion (38%), information technology related to e-commerce (23%), and research and development (25%).

About 70% of SMEs are also planning to cut down on their costs,  mainly by downsizing business scale, changing suppliers, and leveraging technology.

SMEs from "Accommodation and Food Services" (68%) and "Social and Personal Services" (51%) said they would apply for government funding, while those from the "Retail" sector said they would mainly rely on offering price discounts (46%) or expect to take advantage of the Consumption Voucher Scheme (34%).