Confidence among small businesses in Hong Kong fell to an all-time low as they continue to feel the impact of the coronavirus pandemic and record economic contraction last year, according to a survey by accounting body CPA Australia.
Only 21 per cent of small businesses – those with 20 or fewer employees – in Hong Kong expected their business to grow this year, the lowest on record since the survey started in 2009. This compared to an average of 61 per cent across all respondents in Asia-Pacific for 2021.
The weak outlook was also reflected by the low intention of Hong Kong’s small businesses to increase headcount. Only 12 per cent of respondents expected to increase staff in 2021, compared to the survey average of 36 per cent.
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“For two consecutive years, expectations of business growth among Hong Kong small businesses have been the lowest of the surveyed markets” in Asia-Pacific, said Janssen Chan, CPA Australia’s Greater China divisional president.
Hong Kong’s economy shrank 6.1 per cent last year, the biggest annual contraction on record, while retail sales plunged by a record 24.3 per cent year on year in 2020. The city’s jobless rate, meanwhile rose to 7.2 per cent in February, the highest since 2004. The city’s labour chief warned the market will continue to face challenges as the coronavirus pandemic has not yet come under control and inbound tourism remained frozen.
Over 4,200 small businesses in 11 markets across the Asia-Pacific were surveyed between 9 November and 10 December last year, of which 306 were from Hong Kong.
Some 53 per cent of respondents in Hong Kong identified Covid-19 as having had a major negative impact on their operations in 2020, and 65 per cent said they needed one year or more to recover, Chan said.
Small businesses in Hong Kong were also less inclined to innovate, with only 8.5 per cent of respondents saying they would introduce new products or services in 2021, compared to the survey average of 23 per cent.
“While business innovation may involve additional expenditure in the short term, small businesses in Hong Kong should be more proactive in reassessing their resource allocation and consider innovating through the adoption of technology,” Chan said. “This could enhance their long-term competitiveness and help them keep pace with their peers in other Asia-Pacific economies.”
The use of government grants as the main source of external finance jumped from 9 per cent in 2019 to a record high of 33 per cent last year, among respondents in Hong Kong.
Small businesses in the catering, retail and tourism-related sectors were finding it increasingly difficult to operate because of stringent social distancing measures as a result of Covid-19, said Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades, and chairman of the Hong Kong Brand Development Council.
“Under the current operating conditions, it is becoming more and more difficult for small and medium-sized enterprises [SMEs] to grow in Hong Kong,” he said.
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