Growth ambitions of Singapore middle-market companies outpacing global peers

Singapore, 25 July 2018

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  • Overseas expansion and M&As key to growth strategy
  • Slow or flat global growth and cash flow seen as greatest external risk and operational challenge to growth
  • Embracing cognitive technologies and hiring skilled talent are top priorities

Middle-market companies across the globe are optimistic about business conditions and opportunities, according to the findings of the annual EY Growth Barometer. The annual survey of 2,766 middle-market executives across 21 countries, including 103 respondents from Singapore, reveals that majority of companies are targeting growth between 6-10% (Singapore: 51%, Global: 60%), which is significantly higher than the International Monetary Fund’s current GDP forecast of 3.9% for the year.

Growth ambitions driven from Asia-Pacific

While middle-market companies are bullish on growth on a global scale, ambition is highest in Asia-Pacific. Four in 10 companies in China, Southeast Asia and Australia, as well as 39% of Singapore companies, are targeting double-digit growth, significantly outpacing the global average growth rate of 6%.

Annette Kimmitt, EY Global Growth Markets Leader, says:

“We are seeing a rare synchronization of growth across all major global economies that is boosting executive confidence, particularly led by the Asia-Pacific region. For the first time, middle-market company leaders are getting ahead of change and shaping their businesses through investment, expansion and prioritization to ride the wave of opportunity.”

The race to embrace Artificial Intelligence (AI)

Intelligent automation and machine learning have moved center stage as vital enablers to ambitious middle-market growth. The survey found that Singapore has the third-highest adoption rate of AI at 9%, following closely behind China and Netherlands that both tie at 10%. A further 72% of Singapore companies say they plan to introduce AI within two years.

Despite readily embracing AI, the Singapore market is not a leader in the mature application of new technologies. Many businesses still identify technologies with the traditional roles of improving process efficiencies (29%) and financial data (25%), before the more innovative roles of improving customer experience and creating new business models. Meanwhile, one in five (20%) consider technological disruption as the greatest challenge to growth, behind cash flow.

Hiring skilled talent key to growth ambitions

Three in ten companies in Singapore say that attracting talent with the right skills tops the list of growth accelerators. The importance of the talent agenda is fueling plans to grow their overall headcount, where 40% of companies are planning to hire more full-time talent and 39% are looking for additional part-time employees, contractors or freelancers.

As Singapore companies grow their teams, more than half (54%) believe that the ideal organization is one that is able to attract younger and digitally-native talent.

Singapore companies look abroad for growth

Thirty percent of Singapore companies cited overseas expansion as a growth priority to overcome the limitations of the small domestic market. With M&A being the second-most cited growth strategy (19%), inorganic growth could be a route that Singapore executives are considering for international expansion.

Choo Eng Chuan, EY Asean Growth Markets Leader, says: “Many Singaporean entrepreneurs are open to overseas collaboration. This can take many forms. For example, by selling part of their business to an external partner, they can access new markets and explore greater opportunities. This may explain why strong alliances with external partners is the key path to boost agility for more than one in four of the country’s respondents.”

Given Singapore businesses’ overseas ambitions, slow or flat global growth is perceived as the main external risk for 41% of Singapore companies, compared with 25% in the rest of the world.

Another key challenge to growth is insufficient cash flow, a factor cited by 38% of the Singapore companies. Singapore businesses’ concerns with cash may explain why improving supply chain and operations efficiency is considered one of the top growth accelerators (29%).

Regulation driving, not stifling, innovation

This year, regulation has emerged as a new force in stimulating innovation, not obstructing it. Choo says this reflects the government’s efforts to incentivize new ways of working. “The Singapore government has in place several fiscal assistance such as company grants for adopting productivity and technology, support for international expansion and R&D tax breaks, so as to encourage companies to venture into new areas. In Singapore, there are many innovation incentives that have been kick-started by the government and taken up by local companies.”

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About the EY Growth Barometer

EY Growth Barometer is an annual survey that explores middle-market leaders’ growth strategies and how they are being delivered across a wide range of capabilities. These capabilities are linked to the EY 7 Drivers of Growth – EY’s framework to help companies accelerate growth. EY commissioned Euromoney Institutional Investor Thought Leadership to undertake an online survey of 2,766 C-suite (60% CEOs, founders or managing directors) in companies from 21 countries and with annual revenues of US$1m-US$3b. The survey was conducted from 15 January-1 March 2018. EY further invited its EY Entrepreneur Of The Year™ alumni from across the globe to take the survey. The survey was available in English and six other languages. Further in-depth interviews were carried out during March - April 2018 to provide additional specific insights.

About EY’s Growth Markets Network

The EY worldwide Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we’ve helped many of the world’s most dynamic and ambitious companies grow into market leaders. Whether working with international, mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed.