Business confidence hits 3-year low linked to US-Iran conflict

Large enterprises, with broader international footprints, have been more exposed to tariff pressures compared to small and medium enterprises. Sectors including manufacturing, engineering, industrials, construction, and real estate continue to face more acute pressures in operational and manpower costs.

In response, businesses are increasingly prioritising efficiency, cited by 36% of respondents, and transformation, cited by 39%, as they seek to strengthen their foundations in a volatile environment.

Whilst 93% of large enterprises have adopted digitalisation, only 69% of small enterprises have done the same, resulting in a 28-point gap in digitalisation success between the two groups. The cost of implementation, system compatibility, and cybersecurity concerns remain the most commonly cited barriers.

Artificial intelligence adoption is advancing but unevenly. One in two small enterprises has implemented AI solutions, compared to higher uptake among large enterprises, particularly in the technology, media, and telecommunications sectors.

Amongst businesses that have deployed AI, 47% report cost reductions, 46% report productivity gains, and 46% report improved customer engagement. One in three businesses plans to increase AI budgets by more than 25% in 2026.

“AI is no longer a future capability but a current imperative. Organisations that embed AI into their operations will be better positioned to enhance decision-making, strengthen resilience, and stay competitive in an increasingly digital economy,” said Alvin Eng, Head of Enterprise AI at UOB.

Sustainability has also taken a step back. Its perceived importance has declined by seven percentage points since 2024, returning to 2022 levels, with a 24-point adoption gap emerging between large and small enterprises. Businesses are increasingly moving away from reputation-driven sustainability initiatives toward those that deliver measurable operational and cost benefits.

On overseas expansion, 70% of businesses plan to expand beyond Singapore within the next three years. ASEAN has emerged as the preferred destination, with 64% of businesses indicating a regional focus, up from 52% a year ago. 

Key target markets include Malaysia, Thailand, and Vietnam, with Indonesia identified as a future priority. Planned foreign direct investment averages approximately $24.32m ($19m) over the next 12 to 24 months.