Switzerland under pressure as a location for business

Switzerland under pressure as a location for business

A survey of over 80 Swiss companies from various sectors has revealed that more than one-third see Switzerland as a worse place to do business than this time last year, citing the current strength of the Swiss franc and high price pressure as the two main factors in this negative trend. 73 percent of the firms fear that their business would suffer if the bilateral agreements were to be terminated.

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According to KPMG Switzerland’s Restructuring Study, the first of its kind, many Swiss firms are now in a worse financial position due in particular to the ongoing strength of the franc, with 45 percent stating that business was currently bad. One of the principal causes has been the high level of price pressure both in Switzerland and abroad. Passing the effects of this pressure on to business partners, as some companies have planned to do, is only possible to a limited extent and at most wins them a bit of time to make structural adjustments.

Consumer goods and retail paint a bleak picture

These changes to the market environment are also reflected in the gloomier view now held of Switzerland as a place to do business, with 64 percent of those surveyed believing the country to be less competitive than this time last year. The strong franc is making Swiss firms particularly jittery, to the extent that 16 percent of respondents even see it as a threat to their existence.

Above all, it has been consumer goods and retail companies but also industrial firms and manufacturers whose situation has deteriorated significantly, with 75 percent in the former and 71 percent in the latter category feeling that Switzerland is becoming a worse location for business.

Fears over bilateral agreements and a lack of clarity over Corporate Tax Reform III

In terms of policy, companies are most concerned by the possible end to Switzerland’s bilateral agreements with the EU: Nearly three-quarters of all those surveyed think such a move would have a negative impact on their business or even jeopardize its very future.

Despite all the uncertainty, firms are generally sticking to a proactive course focused on innovation and growth rather than simply making do with cost savings. However, around 40 percent of respondents with a negative view of the market environment are neither in the process of nor considering any restructuring measures.

“A robust business performance and a largely conservative approach to financing at many Swiss companies over the past few years have ensured that there is still enough left in reserve at the moment,” says Peter Dauwalder, Head of Restructuring at KPMG Switzerland, commenting on the results. “So many of them don’t have any serious capital or liquidity problems just yet despite being in a bad position commercially.”

KPMG Restructuring Study 2015

For the study, KPMG Switzerland surveyed a total of 81 companies from the following sectors:

  • Industry and manufacturing (46%)
  • Services (24%)
  • Consumer goods and retail (18%)
  • Construction and energy (12%)

63 percent of the companies were small or medium-sized enterprises (SMEs) employing up to 249 full-time equivalents (FTEs). The remaining 37 percent were large companies employing 250 or more FTEs.

Breakdown by annual revenues: 28 percent of the companies had revenues under CHF 25 million, 16 percent had revenues between CHF 25 and 50 million, 29 percent had revenues between CHF 50 and 250 million and 17 percent had revenues in excess of CHF 250 million.

Restructuring Study – Business location Switzerland under pressure

KPMG asked companies in Switzerland about the impact of the economic and political changes to their business.

 
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© 2016 KPMG Holding AG is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved.

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