Business closures in Singapore rose by nearly 13 percent in the first seven months of 2026 compared to the same period last year, even as new business registrations continued to outpace shutdowns, according to data from the Accounting and Corporate Regulatory Authority (ACRA).

Between January and July, a total of 38,146 business closures were recorded, marking a 12.8 percent increase over the previous year. During the same period, 49,305 new businesses were established, with the information and communications sector showing the largest growth in new firm registrations.

The construction industry experienced the most pronounced increase in closures, despite being one of the better-performing sectors in Singapore’s economy. The Building and Construction Authority has projected up to S$53 billion worth of public and private contracts to be awarded in 2026. Nevertheless, the sector saw 2,127 shutdowns in the first seven months, a rise of nearly 47 percent from 2025. New constructions firms numbered 2,277 during this period.

Industry observers attribute the closure trend among smaller construction firms to rising costs and intensified competition from foreign contractors. An interior designer, speaking anonymously, noted that several local firms have declared bankruptcy or closed due to cost pressures, including escalating labor and raw material expenses exacerbated by geopolitical tensions such as the Iran conflict affecting energy prices.

Sim Chee Siong, a partner at Rajah & Tann law firm, highlighted that many contractors operating under fixed-price contracts have suffered margin erosion or losses without adequate cost-escalation clauses, leading to severe cash-flow challenges. He added that a cautious lending environment has further contributed to the difficulties faced by firms operating with narrow margins.

Price increases of around 10 percent for materials like steel reinforcement bars and ready-mixed concrete have also squeezed profit margins, according to Ian Teo, president of the Micro Builders Association Singapore. He pointed to the growing presence of foreign contractors—primarily from China—with more extensive financial backing and supply chains as a factor that intensifies competition in the local market. Smaller local contractors often face higher operating costs due to manpower, compliance, and training expenses.

The food and beverage (F&B) sector was the next most affected, with closures rising 25.1 percent to 2,101, although 2,594 new F&B businesses were started during the same period. This sector traditionally experiences high churn rates due to low entry barriers and shifting consumer tastes. Notable recent closures include local gelato shop Tom’s Palette, Swedish cafe Fika, and patisserie Panther.

Some businesses that have ceased operations but not yet deregistered were not included in ACRA’s figures. For example, Chef’s Tavern, a European-Japanese fusion restaurant in Craig Road, closed in December 2025. Owner Stephan Zoisl cited a costly strategic pivot from fine dining to a mass-market model that failed to generate sustainable revenue, coupled with high fixed rental costs that led to eviction despite strong bookings.

ACRA’s figures also reflect a surge in business closures in March 2026 due to intensified efforts to strike off dormant or unrenewed companies, a practice intended to maintain register accuracy and prevent misuse of defunct entities.

On the opening side, some 7,300 new information and communications firms were registered by the end of July, representing a 26.7 percent increase from 2025. The administration and support services and retail trade sectors also experienced notable growth in new businesses.

Song Seng Wun, economic adviser at SDAX, linked the boost in service providers to the proliferation of artificial intelligence, although he cautioned that profitability and churn rates remain key factors in determining long-term viability. The growth of digital infrastructure investment tied to AI could also drive demand for construction projects.

Teo noted upcoming major developments, including Changi Airport Terminal 5 and Marina Bay Sands expansion, which may benefit the construction sector. He added that micro builders could find opportunities in landed housing, renovations, maintenance, green retrofitting, and specialized services, but emphasized that smaller firms need access to appropriately scaled projects and capacity-building support to capitalize on these prospects.