Business Costs of Singapore's Manufacturing And Services Sectors

Between 2011 and 2015, the unit business cost index for the manufacturing sector (UBC) rose by 2.5% on a compounded annual growth rate (CAGR) basis, while the unit business cost index for the services sector (USCI) rose by 1.9% CAGR. In 2015, the UBC rose by 1.4%, slower than the average increase over the period of 2011-2015. On the other hand, the USCI rose by 2.5% year-on-year in the first three quarters of 2015, higher than the average seen in the last four years (Exhibit 1).

In the manufacturing sector, labour cost accounts for the largest share of total business costs, followed by work given out and royalties payments. Collectively, these three components account for 64% of the business costs of large enterprises and 71% of the business costs of small- and medium-sized enterprises (SMEs) in the sector. The other services cost components, including utilities, fuel, rental of building/premises and charges paid to other firms for inland transportation, make up a far smaller 16% and 11% of the business costs of large enterprises and SMEs respectively. Details of the cost structure of the large enterprises and SMEs in the manufacturing sector, as well as in the various manufacturing clusters, are in Annex A, Exhibit A1.

Similarly, labour cost constitutes a major cost component for the services industries, although the share of labour cost in total business costs ranges from less than 15% for the transportation & storage industry to more than 30% for more labour-intensive industries such as retail trade and accommodation & food services. Across all services industries, except for the transportation & storage industry, the labour cost share of total business costs is larger for SMEs than for large enterprises.

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