Local firms halt hiring plans to combat shrinking profits

Revenue performance dropped drastically in 2015.

Companies in Singapore have resorted to staff cuts in order to stay afloat as their earnings slide, with redundancies expected to remain on the rise in 2016.

The latest Macroeconomic Review by the Monetary Authority of Singapore (MAS) showed that firms are grappling with lower profitability on back of rising costs and lacklustre external demand.

The global revenue performance of the top globally traded firms thaat have significant operations in Singapore plunged by about 19% in 2015, according to EPG's Corporate Conditions Index. Although downward price pressures had an impact on corporate earnings the contraction in sales volumes had a larger impact on growth.

The MAS' report also showed that the median earnings before interest and tax (EBIT) margins of SGX-listed firms in construction and retail trade have, on average, fallen over the past five years.

"Against this backdrop, some firms have responded to these challenges by consolidating their domestic operations. Unlike in previous instances of outright recession, the adjustment process this time round has been more gradual and drawn out,” the MAS noted.

The latest Nikkei Singapore PMI showed that employment in the private sector fell for the second consecutive month in April. Private companies cited insufficient workloads and weaker market conditions as reasons for shedding staff. Purchasing activity also fell in the month, reflective of weaker client demand.

“Companies recorded further falls in purchasing activity and employment, albeit marginal, while stocks of inputs declined markedly, indicating that expectations for growth in the coming months remain relatively muted," commented Annabel Fiddes, Economist at Markit, which compiles the Nikkei PMI survey.