By Oh Boon Ping

Businesses in the service sector, such as education and IT services, remain upbeat about prospects, according to a survey.

Three hundred small to medium enterprises were polled last month by business to business insight agency Kadence Asia Pacific, which compared the findings with a previous survey in January.

In terms of overall confidence, the respondents were slightly less sanguine about their prospects in the second quarter than at the start of the year.

In a statement, Kadence said 34 per cent of businesses said that prospects for their industry sector will be better in the next 12 months, while 20 per cent said the outlook is worse.

The remainder either said prospects are the same or they are unsure.

The results compare with 44 per cent in January forecasting better prospects and only 14 per cent seeing worsening conditions.

The main contributing factor to a less optimistic outlook is inflation, which is now a far greater concern among SMEs than it was at the start of the year.

Relatively few (4 per cent) mentioned the US economic slowdown as part of a decrease in overall business confidence.

Kadence managing director Piers Lee said: 'Although the net Kadence Business Confidence Index fell from 66 in January to 59 in May, on balance, SMEs still feel positive on future business prospects.

'Many companies state that they see orders picking up and point out that despite uncertainties in the US market, the Singapore economy remains stable.

'More specific factors such as the integrated resorts and the Formula One motor race are also having spin-off benefits for SMEs. There is even evidence that inflation itself is encouraging more consumer spending with SMEs.'

As in January, the survey again asked SMEs which areas they would most like assistance in.

In the latest study, government grants and subsidised loans to aid start-up organisations were highlighted as most important by 27 per cent of businesses.

This was followed by the promotion of Singapore as a business hub (20 per cent), increased financing options from banks (17 per cent) and the relaxation of employment laws (17 per cent) allowing more foreign labour to enter the market.

Interestingly, SMEs in the manufacturing sector were more likely to want better financing options and relaxation of employment laws compared with those in other sectors.

Those in retail and trading sector want more government grants.

This article was first published in The Business Times on 24 June 2008.