Over half of small businesses report falling sales and profits amid global turmoil

Six in 10 small and medium-sized enterprises say global conditions are weighing on their operations, according to a new survey. The prolonged conflict in the Middle East, exchange rate volatility and rising international raw material prices appear to be squeezing SME profitability.

The survey, conducted by the MainBiz Association among 323 of its member companies, found that 56.3 percent of respondents said shifting global conditions had increased their operational burden. The average burden level was 62.2 out of 100.

Only 8.4 percent of firms reported growth in both sales and operating profit, while 56.0 percent said both had declined. Manufacturing companies (67.1 percent) and exporters (67.4 percent) reported above-average burden levels. Within manufacturing, the petrochemical, electrical and electronics, and food and textile sectors felt the strain most acutely.

The most striking finding was that companies attributed their difficulties more to rising costs than to supply chain disruptions. The top burden cited was higher purchase prices for raw materials and products, named by 64.1 percent of respondents, followed by increased energy costs, exchange rate fluctuations and higher logistics expenses. Cost inflation, rather than supply chain bottlenecks, has become the primary threat to SME profitability.

The actual cost burden was considerable. Some 42.8 percent of firms said operating costs — including raw material purchases and energy — accounted for more than half of their sales. Among those, 21.4 percent said operating costs exceeded 70 percent of sales.

Despite the pressure, most companies focused on cutting costs and monitoring conditions rather than developing proactive strategies. Only 5.3 percent said they had put in place an active management strategy in response to global changes. On supply chain resilience, 28.8 percent — the largest single group — said they had taken no specific action, suggesting that many SMEs lack the capacity to get ahead of external uncertainty.

The most-requested form of government support was stabilizing raw material and product supply and easing price pressures, cited by 39.6 percent of respondents, followed by financial support (24.8 percent) and logistics and transportation assistance (11.5 percent). However, only 37.5 percent rated the government's response as adequate, and the average policy satisfaction score was just 52.1 out of 100.

The MainBiz Association said the shifting global environment has moved beyond a temporary external shock and is becoming a structural risk that threatens the cost structures and profitability of small businesses. The association called for policies that go beyond short-term financing to build SME resilience — including measures to cushion raw material price swings, distribute crisis-management guidelines and help companies diversify their suppliers and customers.

The findings underscore how the prolonged Middle East conflict, exchange rate swings and rising global commodity prices are directly squeezing SME margins. While supply chain disruptions were once considered the greatest risk, rising input costs have emerged as the central threat to business operations. Concerns are also growing that smaller firms with limited pricing power will find it increasingly difficult to pass higher costs on to buyers, putting further pressure on their bottom lines.