With costs rising, S’pore companies freeze wages and look abroad for AI skills

SINGAPORE: Singapore businesses are being squeezed by rising costs from global uncertainty and the need to invest in innovation to stay ahead, said Deel’s Head of Global Policy, Nick Catino, at this week’s AI Summit.

A survey conducted by Milieu Insight in April 2025, commissioned by Deel, found that 81% of businesses were affected by global tariffs, while 56% faced higher operational costs. These pressures have led 60% of companies to freeze wages, 48% to reduce hiring, and 43% to lay off staff.

The survey gathered responses from 350 Singapore-based business leaders and managers across both SMEs and large enterprises.

To cope with these challenges, about one in three Singaporean businesses (31%) have sped up their AI or automation efforts. Among those using AI, 71% saw increased efficiency and productivity, 61% reported smoother operations, and 50% cut costs.

However, wage pressure was higher among the 86% of companies further along in AI adoption.

“Even those leading AI adoption are feeling the strain, showing that economic headwinds are impacting all levels of digital transformation,” Mr Catino said, noting that while AI adoption can help with productivity and cost savings, it is not a “silver bullet for macroeconomic pressures.”

He added, “Many businesses remain cautious, either due to the upfront investment required or uncertainty about long-term returns, meaning these benefits remain out of reach for the majority who have yet to adopt AI at scale.”

Despite Singapore’s status as a digital hub, 68% of businesses in the city-state are still in the early stages of AI adoption, with enterprises (43%) making more progress than small and medium-sized enterprises (SMEs) (12%), partly due to a shortage of AI talent.

Nearly half (47%) of respondents said the local talent pool is not enough to meet the demand, citing difficulty with recruiting locals’ high salary expectations (51%), limited career development opportunities (50%), and skill mismatches (47%). Notably, three in five organisations reported lacking AI expertise. Currently, only 20% of local businesses have allocated a dedicated budget for reskilling.

To address this demand, 62% of businesses said they’re open to hiring overseas talent.

Respondents said that government support (92%), financial support (42%), upskilling (26%), and technical or advisory support (15%) are crucial for AI adoption.

Meanwhile, 57% of respondents said they want stronger regulatory guardrails. According to the report, only 5% are actively engaging with Singapore’s National AI Strategy (NAIS 2.0), while 95% know little or nothing about the country’s AI governance framework.

On Tuesday, the Infocomm Media Development Authority (IMDA) announced 800 practitioner jobs and training opportunities for locals to meet the demand for AI talent.

“With economic uncertainty and tariff pressures mounting, Singaporean businesses should ensure AI investments deliver tangible results in productivity, efficiency and margin resilience,” Mr Catino said. /TISG

Read also: SME Association warns some Singapore firms could enter ‘life support mode’ as US tariff pause nears end