CPA Australia: Hong Kong Small Businesses on the Brink as Confidence Slumps to Record Low

• Hong Kong
  small businesses register lowest confidence on record in CPA Australia
  survey.
• Seeking
  government support most common action in response to COVID-19. 
• Only 8.5 per
  cent of Hong Kong small businesses will innovate in 2021. 

HONG KONG SAR – Media
OutReach – 22 March 2021 – Amid the prolonged impact of COVID-19
and a record economic contraction in 2020, Hong Kong small business confidence
slumped to record low. Only 16 per cent of surveyed Hong Kong small businesses
reported growth last year, and only 21 per cent expect their business to grow
this year.

 

These results are
part of CPA Australia‘s 2020-21 Asia-Pacific Small Business
Survey, published today. The survey canvasses the views of 4,227 small
businesses in 11 markets across the Asia-Pacific region, including Australia,
Mainland China, Malaysia and Vietnam to understand their business strategies
and outlook. Three hundred and six Hong Kong small businesses took part.  

 

“For two
consecutive years, expectations of business growth among Hong Kong small
businesses have been the lowest of the surveyed markets. 53 per cent of
respondents identified COVID-19 as having had a major negative impact on their
business operations in 2020, and 65 per cent of them expect to need one year or
more to recover.” said Mr. Janssen Chan, CPA Australia’s Greater China
Divisional President 2021. 

 

When asked what
major actions businesses took in response to COVID-19, small businesses in
Hong Kong were most likely to have sought government support and subsidies (33
per cent), reduced capital expenditure (32 per cent), and reduced staff numbers
/ costs (22 per cent).  

 

“The relief
measures announced by the SAR Government supported small businesses to combat
the worst of the pandemic. According to the survey, 44 per cent of respondents
sought external funds for business survival. Using government grants as the
main source of external finance jumped from 9 per cent in 2019 to a record high
of 33 per cent last year,” Chan said. 

 

As a response to
COVID-19 last year, beginning or increasing the focus on online sales was one
of the key actions taken by small businesses in many of the markets
surveyed. However, only 17 per cent of Hong Kong respondents took action
to begin or increase online sales, which is lower than the survey average of 25
per cent. Although 57 per cent of Hong Kong respondents received more than 10
per cent of their sales through digital payment options, this is lower than the
survey average of 64 per cent and significantly behind leader Mainland China
(91 per cent).  

 

“The issuing of electronic consumption vouchers, announced
in the Hong Kong Budget, is an excellent opportunity for small businesses to
take advantage of digital payment and e-commerce. In light of the
overwhelming response to the Distance Business Programme, we suggest that the
government consider re-opening applications to the Programme to continue
driving the digitalisation and technology adoption of small businesses.” Chan said. 

 

Small business
confidence in Hong Kong remains subdued. Only 21 per cent of respondents expect
their business to grow in 2021, compared to the survey average of 61 per cent.
This weak outlook is reflected in the cautious approach Hong Kong small businesses’
low intention of increasing their headcounts. Only 12 per cent of respondents
expect to increase staff in 2021, compared to the survey average of 36 per
cent.

 

Hong Kong small
businesses are also less inclined to innovate, with only 8.5 per cent of
respondents stating they will introduce new products or services in 2021,
compared to the survey average of 23 per cent.  

 

“While business innovation may involve
additional expenditure in the short term, small businesses in Hong Kong should
be more proactive in reassessing their resource allocation and consider
innovating through the adoption of technology. This could enhance their
long-term competitiveness and help them keep pace with their peers in other
Asia-Pacific economies,” Chan said.

 

CPA Australia
recommends Hong Kong small businesses consider the following measures: 

• consult a trusted professional
  adviser to improve recovery prospects.




• seek
  government financial support where appropriate to your circumstances, such
  as the Special 100% Loan Guarantee under the SME Financing Guarantee
  Scheme and the Pre-approved Principal Payment Holiday Scheme. 
• manage cashflow and debt closely
  paying attention to the cost of external financing.   
• leverage government support
  schemes to increase the adoption of technology.
• identify,
  invest in and adopt new technologies to keep innovating. 
• explore opportunities to diversify
  and expand into new markets, especially to cities in Mainland China
  and ASEAN countries.