A majority of Hong Kong small and medium-sized enterprises (SMEs) are still struggling to return to pre-pandemic levels, as per the findings of the SME Survey conducted by the Chamber in July.
Over 39% of these businesses anticipate further declines in the coming year, which underscores the ongoing challenges SMEs face and highlight the need for targeted support and practical strategies to help them recover and thrive in the post-pandemic landscape.
In total, 74 of the Chamber’s SME members participated in the survey. The largest group of respondents were from professional and business services, followed by import and export, wholesale, manufacturing and retail.
Economic Outlook
Respondents expressed mixed sentiments regarding their outlook for the current year. While 25.7% foresee an increase in turnover in 2024 compared to 2023, 39.2% anticipate a decrease. A large majority (77.0%) of SMEs have not yet fully rebounded to pre-pandemic levels.
Business Plans
Asked about their significant challenges in the upcoming 12 months, many expressed concerns about their cash flows, with 33.8% considering it very important and 24.3% rating it fairly important.
In addition, high operating costs stood out as a significant area of concern. A combined 58.1% highlighted high labour costs as very or fairly important in the coming year, while 54.1% expressed similar concerns about high rental costs.
Furthermore, 21.6% and 14.9%, respectively, noted that a decline in local consumption and manpower shortages were not significant to their businesses in the next 12 months, suggesting these challenges may have somewhat eased.
On a positive note, despite these obstacles, half of the surveyed SMEs indicated no plans to adjust their business scale, while another 21.6% aimed to increase their operations. However, nearly half of SMEs said they would consider lowering prices to attract more business.
To tackle manpower shortages, a large majority (64.9%) said their staff numbers would remain unchanged, while 31.1% planned to increase staff salaries.
Regarding market expansion, 37.8% expressed intentions to enhance their presence in overseas markets, with 24.3% opting for an increase. These sentiments contrast with the 25.7% planning to boost their presence in the Mainland market, while 32.4% are considering reducing their presence in the upcoming year.
Financing
Regarding their ability to secure financing, approximately half (51.4%) of the surveyed SMEs deemed it fair, while a substantial majority (45.9%) said they found it challenging.
Despite the Government offering over 40 funding schemes with varying scopes, amounts and requirements to promote and support the development of enterprises and industries in Hong Kong, just over half (54.1%) stated they have applied for at least one of these schemes. The most sought-after scheme is the SME Export Marketing Fund (EMF), followed by the SME Financing Guarantee Scheme (SFGS), the Technology Voucher Programme (TVP), and the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund).
Many SMEs found the instructions and guidelines to be clear concerning the application process, ranking this aspect the highest among other attributes. Feedback on the communication channels was varied, with approximately 35% considering them sufficient and 40.5% indicating they were insufficient.
However, a substantial majority (77.5%) of SMEs expressed that the processing time for government fund applications needed to be shorter. Furthermore, 65% of respondents reported that the process required excessive documentation.
Among those who did not apply for the government funding schemes, half indicated that the application procedures were overly complex. Some 32.4% expressed concerns about the burdensome requirements, such as the lack of flexibility in use of funds and demanding reporting requirements. Another 32.4% cited a lack of awareness regarding the available funding schemes.
SME Financing Guarantee Scheme (SFGS)
Among those applied for government funding, 42.5% applied for SFGS. Nearly all sought the Special 100% Loan Guarantee, while some also opted for the 90% and 80% Guarantee Products.
The partial principal repayment (PPR) arrangement allows borrowing enterprises to repay only 10%, 20%, or 50% of the original principal repayment amount (OPRA) each month over a specified period, providing them with more time to gradually switch from principal moratorium to normal repayments. However, among the SMEs that applied for the SFGS, a large majority (64.7%) did not apply for the PPR arrangement.
Government Support
Asked if the current policies and programmes provided by the Government sufficiently support the growth of their businesses, nearly two-thirds (63.5%) considered it inadequate, while 31.1% stating it was just enough.
In terms of government support, the most critical needs identified were access to funding, followed by reducing bureaucratic red tape, and stimulating networking and collaboration.
About the Survey
The SME Survey, designed to gain a deeper understanding the challenges that SMEs are facing, was conducted from 24 to 31 July 2024. The largest group of respondents were from professional and business services (31.1%), followed by import and export, wholesale (24.3%), manufacturing (16.2%), and retail (9.5%) sectors.