Small firms' optimism dented by fear of dearer loans, higher rent

PUBLISHED : Saturday, 30 April, 2005, 12:00am
UPDATED : Saturday, 30 April, 2005, 12:00am

Businesses expect a more stable environment

Looming rent increases and uncertainty over the impact of future interest rates have dimmed the business outlook among small and medium-sized enterprises for the coming three months.

According to the latest quarterly survey by the Hong Kong Productivity Council, the Business Operating Environment Index for SMEs fell just under 5 percentage points to 9.25 per cent, from 14.01 per cent.

The index was dragged down by concerns over higher operating costs and fears over the financial and investment outlook.

The index is the percentage of respondents having a positive outlook minus the percentage with a negative outlook about five factors, including risk, costs and human resources.

The operating cost sub-index plunged more than 21 percentage points, to 19.3 per cent. The investment indicator also dropped 12 points, to 3.2 per cent.

'Higher rent and finance costs are a key concern but I'm hoping that the overall index will be more stable in future,' said Vincent Li kai-lun, of the Productivity Council.

Mr Li pointed out that many SMEs expected greater opportunities in the coming quarter and a less risky environment.

In the latest survey, released yesterday, 5.6 per cent more respondents were pessimistic about future opportunities than those who were optimistic. But this is an improvement from the previous quarter's 9.6 per cent.

The risk sub-index increased most, surging more than 11 percentage points to 15.4 per cent. It remained above 20 per cent over the first three quarters last year before plunging to 3.93 per cent in the latest survey.

'After September 11 and Sars, I think SMEs have a much more clear outlook now and expect the overall situation to be more stable.'

The survey found a sunnier outlook overall only for the logistics and transport sector. Respondents in the retail and wholesale, business services, trading, electronics, textiles and plastics industries all reported gloomier expectations.

Fifty-four per cent of respondents said they had expanded to the mainland. Human resources management was a problem for 86 per cent of them.

The survey covered 252 SMEs in the trading sector and 303 in services. An SME is defined as having under 100 staff for trading firms and, for services, fewer than 50.