Crisis affecting medium-sized businesses in Switzerland
ZURICH, March 5, 2009 – The international financial and economic crisis is now affecting medium-sized businesses in Switzerland. Companies not only expect a deterioration in their circumstances but also plan to cut back on their investments and employ fewer staff. Most medium-sized businesses in Switzerland are expected to even start reducing their workforces. These are the findings of the "Medium-sized business barometer 2009" conducted by professional services company Ernst & Young Switzerland. The study is based on the responses of 700 medium-sized businesses in Switzerland to a survey conducted in February 2009.
Although business looks gloomy for Switzerland's medium-sized businesses compared with last year, most companies are still doing well: 87% of medium-sized firms rate their situation to be positive – compared with 97% one year ago. The best business sentiment was reported by companies in Northwestern Switzerland (96%). The area worst affected by the crisis is Mittelland, where optimism waned from 97% to 81%.
Number of pessimists on the rise
Only one in six medium-sized businesses expects their business situation to improve, as opposed to 37% who expect conditions to deteriorate even further. Companies located in Zurich and Central Switzerland are the most pessimistic, where a respective 50% and 45% expect a downturn in business. Most entrepreneurs see dark clouds gathering on the general Swiss economic horizon: 70% of respondents expect an economic downswing, while a mere 6% are holding out for an improvement. "Switzerland's medium-sized businesses are still bracing themselves for the crisis. Many companies expect an economic slump, while hoping to come off unscathed themselves – a hope that will often prove illusory," says Viktor Bucher, Partner at Ernst & Young Switzerland.
On the whole, Switzerland has substantially increased its competitive edge as a business location in recent years, indicating that Swiss companies are heading for the downturn in good shape. "The Swiss economy is very robust. A lot of companies – medium-sized businesses included – have done their homework and have positioned themselves extremely well in the international arena. Those who survive this crisis have the best chances of emerging from it in better condition. But those who were already having problems before the crisis set in will find it difficult to make it through the next few months," says Pierre-Alain Cardinaux, Partner at Ernst & Young Switzerland.
Viktor Bucher has established that the current downswing is affecting the very companies who were always considered to be relatively immune to crises: "What is noticeable is the fact that those companies who proved to have been particularly successful in the past – i.e. the big global industrial companies – are the ones who are now being particularly hard hit. The crisis is taking a particularly heavy toll on Swiss industrial companies, with many reporting unprecedented losses."
Fall in employment to be expected
Although 16% of companies are still planning to increase their staff numbers, a lot more – 21% – want to scale theirs back. On balance, Switzerland's medium-sized companies are thus expected to reduce staffing levels. The findings of the survey show that employment levels in Northwestern Switzerland, Canton Zurich and the area around Lake Geneva are set to be reduced drastically, while levels may increase generally in Central Switzerland and Eastern Switzerland only.
Companies also want to cut back on their investments, with one in five medium-sized businesses planning to invest less. Retailers in particular intend to reduce their investments. Only companies in Central Switzerland plan to invest more than last year, while companies in the area around Lake Geneva, in Northwestern Switzerland, the Zurich region and Eastern Switzerland want to rein in their investments substantially.
Demands on the government
Respondents proved to be happy with the work of their politicians on the whole. But there are many areas where medium-sized businesses would welcome obtaining more governmental support. At the top of the list are the issues of "cutting back on red tape and speeding up approval procedures", an area in which 51% of companies consider there to be a need for urgent government action.
Many entrepreneurs find themselves extremely restricted by legislation and other rules and regulations. The repeated calls for a reduction in red tape thus aim to eliminate excessive government rules and regulations, while basically leveling criticism at how the authorities enforce these rules and regulations. The fact is that long and drawn out approval procedures cost companies staff and tie up possible sources of investment. While some companies employ staff whose sole function is to deal with this red tape, small and medium-sized businesses often find this red tape an excessive burden. The results of the survey show that the government clearly needs to take more action on this issue as it is obviously a genuine problem for medium-sized businesses.
In second place are calls for "less regulation" (33%) and for a "reduction in corporate tax rates" (33%). Against the backdrop of the financial crisis, what is especially surprising is the first demand – given that the past few months have witnessed increasing calls for the creation of a global regulatory authority or "council of wise men" with the remit of providing sufficient advance notice of any new speculative bubbles appearing on the financial markets.
The current recessionary outlook has given rise to many more calls (29%) for "direct support for SMEs" by way of cheaper loans or direct advances than last year (17%).
About the study
This study is based on a survey conducted of the general managers or owners of 700 medium-sized businesses in Switzerland. In light of the rapid pace of economic change, the telephone-conducted survey for this year's study took place in two waves – in November 2008 and in February 2009. The interviews were conducted on behalf of Ernst & Young Ltd by independent market research institute Valid Research (Bielefeld, Germany), who based their survey on the following sector breakdown at regional and national level: 40% services, 26% retail, 14% construction and energy, 20% industry and manufacturing. The respondents' workforces ranged from 30 to 2,000. Listed companies were not included in the survey.
The Ernst & Young Medium-Sized Business Barometer is an annual survey of medium-sized businesses. The study appears in separate country editions in Switzerland, Germany and Austria.
The regions used in our survey are the seven major regional areas officially employed by Swiss Statistics, which can be used in regional comparisons within Switzerland and with other regions in Europe. The seven major regions have been mandatory for Swiss Statistics since 1997. They comprise the region around Lake Geneva with the cantons of Geneva, Vaud and Valais; the Mittelland region with the cantons of Berne, Fribourg, Jura, Neuchâtel and Solothurn; the region of Northwestern Switzerland with the cantons of Aargau, Basel-Landschaft, Basel-Stadt; the region of Zurich with the canton of Zurich; the region of Eastern Switzerland with the cantons of Appenzell Ausserrhoden, Appenzell Innerrhoden, Glarus, Grisons, St Gallen, Schaffhausen and Thurgau; the region of Central Switzerland with the cantons of Lucerne, Nidwalden, Obwalden, Schwyz, Uri and Zug; and the region of Ticino with the canton of Ticino.
Study «Agenda Mittelstand – Mittelstandsbarometer 2009» (PDF, German, 1.23 MB)
Study «Baromètre 2009 des entreprises de taille moyenne – Agenda pour entreprises de taille moyenne» (PDF, French, 1.22 MB)
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