Swiss industry is investing, but increasingly so in robots
- Swiss industry still has not fully digested the Swiss franc shock
- Only one half of companies are satisfied with their business performance
- A higher percentage than in 2016 are expecting improvements this year
- More investments planned – but hardly any growth in staff
ZURICH, 20 MARCH 2017 – Medium-sized Swiss industrial companies are still not especially satisfied with their business situation: in a survey by advisory firm EY, only around a half (52%) of 202 companies considered their current business situation to be good. This is by far the lowest value across all sectors. However, companies are more optimistic for the next six months than they were at the end of last year, and over a third anticipate that their business situation will improve (37%; 2016: 31%). Only companies in the life science industry take an even more optimistic view of the next six months. Almost half of respondents (48%) are preparing for stagnation and expect sales to remain the same this year.
“The relevant macroeconomic indicators are pointing upwards: the domestic economy continues to improve, all EU countries are growing, and the US economy is booming. Against this backdrop, companies expect their economic situation to improve this year. However, the level remains low and some medium-sized industrial companies have still not digested the Swiss franc shock. While the measures taken are having the desired effect and sales are picking up again, the profit situation is still very challenging for many companies,” says Marcel Stalder, CEO of EY Switzerland.
One in eight companies in critical state
The survey also shows that many industrial companies are in a critical state. Their share has risen from 8 to 12% within one year. This is the highest value among all sectors and almost double the level for the economy as a whole. The picture is the same when it comes to strategy: for 11% of companies, the coming months will be all about survival. This figure has now risen for three years in a row.
“These results are a clear indication of the ongoing trend towards de-industrialization. Switzerland has not escaped this post-industrial structural shift: the massive appreciation of the Swiss franc has accelerated the relocation of production abroad. Not all companies will be able to find their feet again and weak companies will disappear,” says Christian Schibler, Partner and Sector Head for Industry at EY.
Strong Swiss franc remains main cause for concern
Two-thirds of the industrial companies surveyed with between 30 and 2,000 employees perceive the strong Swiss franc as the main risk factor for their company’s performance. Moreover, 44% are worried about weak economic performance abroad and 40% expressed concerns about high or volatile commodity prices. These figures point toward the industry being under more pressure than other sectors and are evidence of its strong reliance on exports. One-third of the companies surveyed by EY sell over half of their products abroad. Together with life sciences, this is the highest sector value.
“Industrial companies have to fend off strong competition from abroad to secure sales and profit. Many committed entrepreneurs invest a great deal of time and energy in their businesses and managed to report excellent results last year as well in spite of the challenging environment. Switzerland will continue to assert itself as an industrial hub on the international scene in the area of high-quality products. Manufacturing mass products no longer has any place here,” states Christian Schibler.
Industry 4.0 on the advance
Almost one in three industrial companies in Switzerland expect the domestic economy to improve in the first six months of 2017, compared to a year ago, when only one in four companies said they were optimistic. At the same time, the share of economic pessimists has fallen from 29% to its current level of 11%. An above-average share of 31% of Swiss industrial companies are planning to increase their overall investments in equipment and machinery over the next six months. The last time this figure was even higher was 2011. Meanwhile, 18% of the companies surveyed intend to cut staff this year. No other sector has such low employment momentum.
“The fourth industrial revolution is also making strides in Switzerland. Our statistics suggest that companies have recognized the signs of the times and are stepping up their investments in robots. Thanks to modern information and communication technology, the manufacture of industrial goods is becoming more efficient and personalized, and the quality of products is improving. In Industry 4.0, people, machines, equipment, logistics and also products communicate and cooperate directly with one another. Companies in Switzerland must learn that, going forward, they need to not only optimize individual production steps, but also to completely digitize the entire value chain,” explains Schibler.
Investments in robots instead of employees
Many classical industrial occupations are gradually disappearing and are being replaced by robots. In their place, specific jobs are being created for highly qualified staff. Recruiting specialists like these is challenging, however, and almost one in three companies have difficulty finding adequately skilled employees. The vacant positions are mainly in the technical area. Over 60% of companies have positions in production they cannot fill due to a lack of suitable candidates.
“Obviously, robots are not the end-all solution,” Schibler clarifies. “There is also a need for well trained employees with a broad understanding of new digital technologies who can operate the increasingly complex equipment.” Industrial companies are also facing stiffer competition from tech firms such as Google and IBM for skilled professionals. “Swiss politics needs to stay on the ball in two areas so that industrial companies in Switzerland can be successful in the long term: firstly, they must increase investments in ongoing education and training, and secondly, we need free and uncomplicated access to the European labor market,” adds CEO Marcel Stalder.
Industry demands fewer taxes and bureaucracy
By and large, the companies surveyed at the end of last year are satisfied with Swiss politicians, and their assessment is much brighter than in the previous year. Over a third of companies rated the prevailing policy for companies in Switzerland as positive at the time of the survey. Only 13% thought that the negative influences outweighed the positive ones – the lowest figure for four years. Their primary requests from lawmakers are tax relief and less bureaucracy (57 and 56%) to strengthen medium-sized companies. This is closely followed in third place by the promotion of exports (38%), direct subsidies for SMEs (31%) and protection against foreign competition (29%). One in ten industrial companies want the policies governing protection against dismissal to be loosened.
“Our company needs competitive framework conditions. This also includes planning certainty in relation to the tax environment and fewer bureaucratic hurdles. For this reason, we urgently need a new bill on reforming corporate taxation that is capable of achieving a majority,” says EY CEO Marcel Stalder.
- News release(87 KB)
- EY Unternehmensbarometer - Fokus Industrie(2,3 MB)
- Portrait Chris Schibler
- Portrait Marcel Stalder
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