Just a month and a half ago we wrote about the very good employment figures in 2019 in Switzerland. Like in most countries in Europe, the situation has now changed – but how much?
What is to be expected in a pandemic situation like what we have now, is that the Swiss tourism sector has suffered the most and very quickly, too. This is in line with what has happened in Austria, another country with a normally flourishing tourism sector.
Some 95% of all companies in Switzerland are SMEs (the generally used definition being companies having less than 250 employees) and the federal government has been quick to respond to their immediate cash flow needs with loans guaranteed by the Swiss government. Two-thirds of the employees work for these companies and it is crucial for the economy to maintain the buying power of these people.
In an update released on April 15th 2020 the Swiss federal SME website (www.kmu.admin.ch) referred to a study performed by PwC among the Swiss CFOs. They found that 65% of the participating CFO’s expected their companies to be able to get back to normal after one month or less from the end of the pandemic. In other European countries the majority of CFOs are expecting a time frame of around three months.
So, in general the Swiss CFOs are somewhat less worried than their counterparts in other European countries. However, the majority of the Swiss CFOs are seeing severe consequences for the companies’ activities and the pandemic will lead to reductions in revenues and/or company results. The normal result from this is of course a reduction in costs – especially employment costs. In Switzerland many companies have now made their employees to perform reduced working hours (“Kurzarbeit”). This is a mode that is being controlled by the cantons and rather than explaining here, how it works – if you are interested in the matter you will find a good explanation at the website www.ch.ch.
Another survey made by ETH Zurich (Eidgenössische Technische Hochschule Zürich with more than 20.000 students) during the first half of April among around 2.000 executives in commercial and service companies gave a darker picture of the situation, however it is not seen as bad as in the financial crisis of 2009, except for the services sector, which would – according to the expectations of the responders – be hit harder than back then. This would mean sectors like traffic, information, communications and personal services. You can find more details on this topic in an article published on April 17th 2020 in Handelszeitung (www.handelszeitung.ch, in German).
There are some very good news, too: while exports were declining in most other industry branches, the Swiss chemical-pharmaceutical industry grew in the first quarter of 2020 quite significantly. According to the Swiss Federal Customs Administration figures published on April the 24th 2020 the growth was 2.2% in March and 1% in the quarter. This being a major export industry in Switzerland, this led to the trade balance closing in the first three months with a surplus of 8.3 billion Swiss Francs (approx. 7.85 billion euro).
Overall, the Swiss economy is one of the strongest in the world. The different worst-case scenarios presented at the moment talk about potential future (single-digit) unemployment levels in the kind of range that many even well-off European countries have been living with for many years already. The national debt levels of such countries are already high and the European Union and other bodies will have a hard time tackling the economic situations in these countries.
In this situation we believe Switzerland will remain a very interesting market for European companies, that have something of value to offer to Swiss customers. What will not change is that the Swiss will be looking very carefully at your products and solutions before making long-term commitments.