Struggling F&B operators bear the brunt of costly labor crunch

Unit labour costs rose 4.4% in Q3.

Local restaurateurs bore the brunt of rising labor costs in the third quarter. According OSK DMG, the accommodation and food services sector's productivity fell 3.5% year on year last quarter, while food and beverage businesses reported lower sales across the board.

Sales volume of food caterers, fast food outlets and restaurants fell 5.1%, 3.9% and 3.2% respectively. The effects of restructuring policies pushed overall unit labor cost up 4.4% last quarter, its fastest pace in over a year.

“While the desired outcomes of these policies have yet to materialise - labour productivity contracted for a second straight quarter in Q3 - the Ministry of Trade and Industry (MTI) on Tuesday reiterated the need to look beyond quarterly shifts to sector-specific and longer-term gains. Overall labour productivity fell 0.8 per cent in Q3 from a year ago, though smaller than Q2's 1.4 percent drop,” noted OSK DMG.

Here’s more from OSK DMG:

Labour-reliant sectors once again took the bottom ranks when it came to productivity in Q3. The accommodation and food services sector's productivity fell 3.5 per cent year on year, while construction productivity declined 2.9 per cent. 

For these domestically-oriented sectors, lower spending from Singapore's consumers could present yet another constraint to growth. Some of this also showed up in the retail trade sales for the quarter. 

Excluding motor vehicle sales, retail sales volumes contracted 1.2 per cent as discretionary spending fell. Demand for recreational goods fell 10 per cent, while that for furniture and household equipment fell 8.4 per cent.

Similarly, food and beverage businesses - which tend to be labour-intensive and would have had higher wage bills to manage - reported poorer sales.