By Jessica Lim

OVER 130 Singapore small businesses closed down last year, a nearly 25 per cent jump over 2007 and the first annual increase since the dot.com bust seven years ago, according to new Government statistics.

The deepening recession has apparently claimed everything from fruit stalls to shoe shops, and experts say more small companies - which usually have little margin for error - are poised to wind up in the coming months.

Almost 40 per cent of the 131 small businesses that shut in 2008 went belly up from September through December, numbers from the Ministry of Law revealed.

The late year surge - which accompanied the onset of the recession - pushed failings above the total for 2007. It marked the first annual increase since the dot.com bust of 2002, when over 260 businesses bit the dust.

No details were provided on which sectors were worst hit or the reason for the increase, but experts said it is a sign that the recession is taking hold.

The downturn began in earnest in September after stock markets around the world crashed, and the local housing and export markets withered.

Singapore Polytechnic retail management lecturer Sarah Lim said the worst-hit areas have been the wholesale, service and retail sectors.

The first thing that people will do in a downturn is to stop spending because they have no idea what the new year will bring, she said.

Those hardest hit seem to be small and medium-sized businesses, which have little capital reserves.

A recent Straits Times check with 47 such businesses found nearly a third had either closed shop or were preparing to.

One of those firms belongs to Mr Vivek, 55. He closed his six-year-old company, which provides information on businesses, including their credit rating, last week after business dried up.

'We had to face reality. Business just didn't pick up,' said Mr Vivek, whose customer numbers plunged to about one a week, from close to 20 during good times.

It was the same for Mr Y. Z. Ng, owner of a cafe in Clementi. The 33-year-old, who set up shop three years ago, said that business fell by 20 per cent last year. So, when his landlord moved to raise his rent almost 50 per cent - to $5,000 a month - he decided to call it quits.

'The rent increase reduced our profits to next to nothing. It did not make sense to stay open anymore,' said Mr Ng, who will be closing his shop for good this month.

All this, said Association of Small and Medium Enterprises president Lawrence Leow, is not unprecedented during a recession. 'Small businesses do not have the economies of scale which means higher raw material costs among other things,' he said. 'A small cost increase can easily put them in the red.'

According to CIMB-GK economist Song Seng Wun, this might only be the tip of the iceberg.

He predicts 'a whole lot of new lows' this year, which will mark the first recession here to have both the key manufacturing and services sectors in the red.

In the meantime, other small business owners such as Ms Miho Terawaki - who sells children's apparel at Greenberry Loft in Liang Court - are just trying to keep their heads above water.

Ms Miho, who imports clothes form Japan, tries to keep costs down by cutting back on part-time help.

Said the 38-year-old Japanese mother of three: 'It's so close to Chinese New Year but many customers are still just browsing.'

This article was first published in The Straits Times on January 19, 2009.