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UOB Business Outlook Study 2024 (Hong Kong): Retaining talent amidst cost-cutting measures
In the past year, business sentiments in Hong Kong SAR have remained positive despite high inflation and rising interest rates. Most firms have reacted by shifting business priorities to cushion the economic impact and develop new revenue sources, among other measures.
According to the UOB Business Outlook Study 2024 (SMEs & Large Enterprises), more than one in five respondents say the current business environment is very positive, with the most positive sectors being real estate and hospitality, as well as tech, media and telecom.
Figure 1: Snapshot of the key insights from businesses in Hong Kong.
Scaling back to fuel growth
The impact of high inflation is widespread, affecting nearly nine in 10 businesses and resulting in heightened operation costs (56 per cent), difficulty in retaining talent (42 per cent), as well as reduced profits (39 per cent).
Figure 2: How high inflation has impacted businesses in Hong Kong.
While 63 per cent of respondents expect an improved performance in 2024, such optimism trails the regional average of 79 per cent, with 41 per cent of Hong Kong businesses anticipating an improved performance only by 2027.
To mitigate the impact of high inflation, companies are re-evaluating their priorities. This includes implementing cost-cutting measures (37 per cent), improving productivity (32 per cent), and scaling back on new investments (31 per cent). Additionally, receiving funding to retain employees (34 per cent) has been identified as a key initiative for future business success.
Hong Kong firms, too, are reflecting a more proactive approach in a bid to drive future growth. Extending a company’s range of products and services (23 per cent), improving customer service (21 per cent) and adopting digital solutions to automate processes (21 per cent) are central to this strategic shift.
Seizing emerging opportunities
Driven by growth aspirations, nearly eight in 10 businesses are eager to expand abroad within the next three years.
Figure 3: Top factors motivating Hong Kong businesses to expand overseas.
Across sectors, manufacturing and engineering (85 per cent) as well as wholesale trade businesses (84 per cent) were most interested in expanding overseas.
Companies are driven by a desire to improve profitability (63 per cent), to grow revenue and to build a reputation as an international business (both 49 per cent).
To facilitate expansion goals, nearly eight in 10 firms are exploring cross-border digital trade platforms. These platforms offer streamlined processes and connectivity, making international growth more accessible.
The primary markets for expansion opportunities are Mainland China, Taiwan, and ASEAN – particularly Malaysia, Thailand, and Indonesia.
However, the path to new markets overseas is not easy. Respondents face a lack of legal, regulatory, compliance and tax support (41 per cent), in-house talent to drive overseas expansion plans (38 per cent), and the right partners to work with (38 per cent).
Tailored support for stable supply chains
In 2022, Hong Kong's international trade accounted for 384 per cent of its gross domestic product. The city's thriving international airport and bustling shipping routes serve as important hubs for international cargo movement, solidifying its position as a premier Asian hub.
According to the report, nearly nine in 10 respondents consider supply chain management crucial to their operations. However, geopolitical tensions have disrupted supply chains, leading to fragmented services amidst rising supply costs.
To maintain stable supply chains, businesses are pre-stocking raw materials (28 per cent), enhancing inventory management practices (26 per cent), and diversifying their supplier networks (25 per cent).
Support within the supply chain management sphere is vital. Hong Kong businesses are seeking various support measures for better supply chain management such as tax incentives (37 per cent), industry collaborations (37 per cent), and easier access to funding (36 per cent).
Figure 4: Top practices to manage supply chain volatility.
Driving digital transformation for success
Digitalisation efforts have proven successful for businesses in Hong Kong – enhancing productivity, inter-departmental coordination, and data security.
Consequently, adoption rates have been high, with nearly nine in 10 Hong Kong companies embracing digitalisation in at least one department. The tech, media, and telecom sector is the most digitalised at 97 per cent, followed by professional services (90 per cent).
However, businesses faced familiar challenges on their digital adoption journey, including cost (30 per cent), security concerns (29 per cent), and a shortage of digital skillsets (28 per cent).
Businesses that have gone digital are seeking partnerships with technology solution providers and industry bodies, while those yet to adopt digitalisation are eyeing tax incentives before making the transition.
Figure 5: Functions being digitalised by businesses in Hong Kong.
Sustainable solutions for a sustainable future
Despite a burgeoning global emphasis on sustainability, just over four in 10 businesses have implemented sustainable practices, mirroring previous year’s figures.
While over eight in 10 businesses recognised the importance of sustainability, less than a quarter consider it as ‘very important’.
Motivations for embracing sustainability vary, with businesses aiming to enhance their reputation, retain talent, and collaborate with multinational corporations (MNCs) to drive adoption.
Figure 6: Hong Kong businesses welcome sustainable practices for direct cost savings.
However, several obstacles are hindering the widespread implementation of sustainability practices. These include inadequate financial support, internal awareness gaps, and concerns regarding the impact on the cost of products and services.
To overcome these challenges, firms are seeking support measures such as tax incentives and options for sustainable financing. These incentives play a crucial role in incentivising businesses to integrate sustainability into their operations.
UOB is committed to supporting businesses on their sustainability journey, offering a suite of tailored financing solutions to address the diverse needs of businesses at every stage of their sustainability journey.
Helping businesses navigate tomorrow
As businesses in ASEAN and Greater China face a challenging landscape, we want to help them seize opportunities, forge new paths, and reimagine a sustainable future together.
With more than 80 years of experience, UOB has an extensive regional network with a deep understanding of ASEAN dynamics.
At UOB, we are committed to helping businesses navigate the dynamic landscape of the ASEAN region to unlock their full potential. From cross-border trade support to green financing, UOB offers tailored solutions, industry knowledge, and market expertise.
About this study
The UOB Business Outlook Study 2024 (Hong Kong) surveyed 550 business owners and key executives from SMEs and Large Enterprises to understand their views on key topics, including:
- Business sentiments
- Inflation impact and mitigation
- Overseas expansion
- Supply chain management
- Digitalisation
- Sustainability in business
Important notice and disclaimers
This article shall not be copied or relied upon by any person for whatever purpose. This article is given on a general basis without obligation and is strictly for information only. The information contained in this article is based on certain assumptions, information and conditions available as at the date of the article and may be subject to change at any time without notice. You should consult your own professional advisers about the issues discussed in this article. Nothing in this article constitutes accounting, legal, regulatory, tax or other advice. This article is not intended as an offer, recommendation, solicitation, or advice to purchase or sell any investment product, securities or instruments. Although reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this article, UOB and its employees make no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability for any error, inaccuracy, omission or any consequence or any loss or damage howsoever suffered by any person arising from any reliance on the views expressed and the information in this article.
