Swiss SMEs regain their confidence – shortage of specialists makes EU access vital

EY Mid-Market Barometer 2017

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  • EY Mid-Market Barometer shows that conditions for business have improved for the first time in three years
  • SMEs expect the economy to pick up but still have concerns
  • Strength of the Swiss franc is biggest risk for the country’s businesses
  • Much more willingness to invest
  • Shortage of specialist staff is getting worse, access to the European labor market is vital

ZURICH, 7 FEBRUARY 2017 ‒ Conditions for business in Switzerland have somewhat improved for the first time since the start of 2014, according to the Mid-Market Barometer published by the audit and advisory firm EY. Of the 700 companies surveyed, 87% take a positive view of their current business situation, and they are confident about the prospects for their business development and revenues. Things look particularly good in the Life Sciences sector. The overwhelming majority of all companies (93%) describe their present situation as generally stable. The proportion of those describing their situation as very stable, though, currently stands at 35% – three percentage points down.

Swiss companies also expect the economy to improve, and the economic pessimists are in retreat: compared with last year, their share has gone down from 26 to 11%. Meanwhile, 27% (compared with 23% last year) expect the economy to improve. Companies may be more confident than they were, but they are still much more cautious than they were at the start of 2014, when the Swiss franc was still weak against the euro and half of them expected the economic situation to improve.

Despite the more favorable prospects for the economy, companies are still worried about how it might develop in the future. The only thing they see as even more of a cause for concern is the persistent strength of the franc. And they find dealing with cybersecurity – which is important but expensive – much more of a challenge than they did when previous surveys were conducted.
“The persistent strength of the Swiss franc is putting a brake on many companies’ performance. The possibility of an economic slowdown and uncertainties about global politics are also very worrying for managers,” says Heinrich Christen, Managing Partner Regions at EY Switzerland, as he considers the results. “Conditions are still volatile, uncertain and complex, and that puts small and medium-sized businesses under particular strain.”

Investment activity revives
An overall increase in investment over the next six months is planned by 28% of the Swiss companies. Enthusiasm for investment has not been that high since early 2014. Only one out of every eleven companies is planning to scale back investment. Employment is rising, albeit with a minimal decrease compared with last year. While only one out of every nine companies is considering job cuts, one-fifth of businesses (21%) are at present seeking to take on new staff.

Shortage of specialists getting worse
The latest survey shows that the shortage of specialist staff is again becoming a major headache: all of three out of five companies in Switzerland are finding it difficult to recruit suitable specialists. In 2017, this is proving to be a particular problem for companies in the services sector; 65% of them said they were finding it rather difficult or very difficult to find adequately qualified new staff. Most of the vacancies are on the technical side, more specifically in production.

“The shortage of specialist staff is getting worse. The enormous number of vacancies on the technical side is alarming and highlights the urgent need for more investment in the training of specialist staff. The growing importance of digitalization means that more resources need to be devoted to the MINT subjects. And if we’re to keep skilled women and men working, flexible approaches to working hours are called for,” adds Heinrich Christen.

Many Swiss companies – half of them in fact, according to the latest survey – see unrestricted access to the European labor market as essential. “What this response makes abundantly clear is that it’s not just the big players that make a habit of recruiting from other European countries; medium-sized companies too – the ones that employ between 50 and 2,000 people – cannot succeed as businesses without free access to the European labor market. The draft proposal on the implementation of the mass immigration initiative is politically realistic, so it’s important that it should be passed and put into effect in a way that involves as little bureaucracy as possible,” is Heinrich Christen’s response to these pressing challenges.

Sectors: Life Sciences especially satisfied
Looking at the sector-by-sector results, it is clear that Life Science companies are very happy, and not just with the present state of their business. They also top the list of optimists where prospects for the next six months are concerned. While 52% of them expect things to get better, only 3% are pessimistic. “There’s lots of evidence that Switzerland, with Life Sciences clusters in Basel, Zurich and around Lake Geneva, is an extremely attractive location for medium-sized pharmaceutical and biotech firms, not least the many new ones that were set up during the past year. A sensible approach to the taxation of intellectual property helps enable the sector to keep on adding value in future,” says Jürg Zürcher, who has been a Life Sciences partner at EY for many years.

Close behind Life Sciences on the list, Industry and the Services sectors share second place, with 37% of respondents expecting their situations to improve, while 5% expect things to get worse. Next comes Trade, 30% of whose representatives are confident about their prospects, with 7% taking a more pessimistic view. The Construction and Energy sectors are at the bottom of the list. While 29% of businesses in these sectors believe that the business climate will improve over the next six months, one out of ten of those who responded expect adverse conditions for their own operations.

Continued moderate sales growth expected
Even though the business environment continues to be challenging, no more than 11% of the 700 companies taking part in the survey said they expected sales to be down in 2017. Rising sales figures were predicted by 42%. The most optimistic view of rising sales this year is expressed by the Life Sciences sector, where respondents expect the rise to average out at 1.9%. The Industry and Services sectors expect sales to rise by 1.4%, Trade by at least 1.3%, and Construction and Energy are expecting theirs to go up by 1.2%.

Last year, 65% of companies in Switzerland said they were aiming at stability above all else; only 59% are making this their goal now. Indeed, the proportion of firms with strategies prioritizing growth has gone up from 28 to 35%. Companies in the Life Sciences sector in particular are taking this strategy as the basis for their 2017 corporate agendas. “Many companies are still focused on keeping customers, stabilizing their sales figures and reviewing their own strategies. The results from the latest survey, though, do suggest that some of them have already stepped forward, have already revised their strategies and are again going for growth,” says Heinrich Christen.


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