Over three quarters (77%) of Hong Kong small and medium-sized enterprises (SMEs) have not yet recovered to pre-pandemic levels and 39.2% of those expect business to further decline this year, according to the findings of the Hong Kong General Chamber of Commerce’s (HKGCC) SME Survey.
When asked about the major challenges they face in the coming 12 months, 74.3% cited cash flow as their biggest headache, with 33.8% ranking it very important, 24.3% fairly important and 16.2% important. This was partly due to high labour costs, which 25.7% ranked as very important, and high rental costs also being listed as very important (33.8%).
“Regarding the outlook for the remainder of 2024, it is encouraging to see that 25.7% of the SMEs said they expect their turnover for the year to increase compared to 2023,” said HKGCC Chairman Agnes Chan. “However, we are concerned that 39.2% are expecting their business to decrease further, and another 35.1% are not expecting any growth. This worry was also revealed by HKGCC’s Legislative Councilor the Hon. Jeffrey Lam this week after he met with a number of SMEs to listen to the difficulties they are facing.”
To address their current challenges, 37.8% of respondents said they have increased their presence in overseas markets, and 25.7% have expanded their business in the Mainland. Despite having to endure severe cashflow problems, almost half of SMEs (44.6%) are considering lowering their prices to win more customers, which may be a downward spiral. In addition, 23% of respondents said they plan to reduce headcount to ease their cashflow crunch.
Despite various schemes and initiatives, almost half of SMEs said they found it very difficult (21.6%) or difficult (24.3%) to secure financing, and only 54.1% had applied for at least one of the government’s 70 funding schemes. This suggests that increasing awareness of the various schemes and providing help in navigating the application process – as around three quarters said the processing time was too long and bureaucratic -- would help more SMEs to apply for the schemes.
In terms of what more support the Government could provide to help SMEs, access to funding was ranked as the most critical, followed by reducing red tape while stimulating networking and collaboration was ranked third.
About the SME 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.
