SME arrears rise in Q3 as trade war deepens: study

Delayed payments were most evident in the commerce-wholesale and transport/storage sectors.

The negative impact of escalating tensions between the US and China is starting to weigh in on SMEs as sectors with larger exposure to global trade repaid their debts at a slower pace, according to a study by information services firm Experian.

Also read: SMEs sped up debt payment time from 35 to 33 days in Q1

The proportion of SMEs in the commerce-wholesale sector who were able to make their payments on time declined from 45% to 41% QoQ in Q3. The downward trend has also been observed for the transport/storage sector where the on-time SME payments fell from 43% to 39% over the same period.

Similarly, these two sectors posted a marginal increase in SMEs who were more than 90 days delinquent. The proportion of SMEs in the commerce-wholesale sector who were running late on their payments rose slightly from 9% to 11% QoQ. For the transport/storage sector, it increased from 11% to 13%.

“Over the past year, there has been an increase in US-China trade tensions, associated with tariffs, which may be beginning to show its effect,” James Gothard, General Manager, Credit Service & Strategy SEA of Experian said in a statement. “Trade tariffs, through their downstream effects, have the potential to impact Singapore’s SMEs in a number of ways, by reducing the competitiveness of their exports and by affecting sales in overseas markets.”

Business sentiment also soured amongst SMEs as measured in the SBF-DP SME Index. The firm revealed that SMEs have generally been more cautious due to the trade wars, but have been tempered by opportunities in Southeast Asia paired with an uptick in spending due to the year-end festive season.