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UBS SME barometer 1st quarter 2008 - SME growth slows down a gear
The UBS SME barometer indicates a positive final quarter of 2007. Growth of small and medium-sized enterprises (SMEs) in Switzerland has consolidated at a high level. On balance, half of all companies continue to see an improvement in the business climate. Expectations for the current quarter remain positive, though the overall economic climate for SMEs appears to be cooling off slightly. In general, SMEs seem to be lagging slightly behind their bigger competitors.
At the start of a new year and as part of the SME barometer, UBS surveyed around 500 small and medium-sized enterprises (SMEs) in Switzerland - along with 200 large companies for comparison purposes - on their business performance. Overall, 510 companies provided their evaluations of the previous quarter and their expectations for the first quarter of this year. UBS conducts this survey each quarter on behalf of the Swiss Industry and Trade Association.
Positive final quarter of 2007
The Swiss SME economic landscape consolidated at a high level in the fourth quarter of 2007. On balance, half of the SMEs surveyed saw an improvement in the business climate. This is a good result, although SMEs were unable to keep pace with large companies. Overall, around 60% of large companies experienced an improvement in the business climate. SMEs benefited from new orders, which grew only slightly less than in the previous quarter. In contrast to large companies, whose new orders exceeded expectations, particularly in export markets, demand was strongest for SMEs in the domestic market. SME earnings were slightly higher than expected and SME order backlogs grew, on balance, at another third of companies. Around a quarter of SMEs increased their headcount, which also exceeded expectations. However, SMEs lagged far behind large companies in this respect, as on balance, 61% of large companies expanded their workforce.
Comparing industrial and service SMEs shows that new orders and sales at service companies are slightly better than those at industrial companies. The service sector benefited from the excellent domestic economy, reporting rising prices and growing profits. There was little difference between the service sector and the industrial sector with regard to changes in headcount and order backlogs.
Growth slowing down a gear
Expectations for the first quarter of this year remain positive, although most indicators suggest that growth is likely to be more modest. On balance, more than a third of SMEs surveyed still anticipate new orders to rise and over 40% expect higher sales. Earnings expectations are rather modest. Overall and on balance, only 17% of SMEs expect profits to rise compared to last year. By contrast, there is a clear expectation that prices will rise. On balance, 51% of SMEs anticipate that sales prices will rise, a trend which is most noticeable among service companies (62%). By comparison, 29% of industrial SMEs and 31% of large companies expect higher sales prices.
In summary, the survey in the first quarter of 2008 indicates the business climate for SMEs will cool off. However, the positive underlying trend looks set to continue.
UBS SME barometer
Notes: black bars = realized figures for the previous quarters; shaded bars = expectations for the current quarter; balance of the "gains" and "losses" reported (year-on-year) according to UBS survey: business climate = average of the balance of new orders and sales reported
The methodology used in determining the UBS SME barometer
The UBS SME barometer is based on an evaluation of the UBS survey on manufacturing that has been carried out by the Bank since 1975 and which was extended from the third quarter of 2006 to include service providers. Around 700 companies (500 SMEs and 200 large companies), which form a representative cross-section of the Swiss economy, are surveyed every quarter. Any companies employing less than 250 people are classed as SMEs. The barometer reports the balances of the current and expected business climate, employment, sales prices and earnings of SMEs as a whole. These indicators are reported as weighted averages of the performance of each sector (manufacturing/services), with the weighting being based on contributions to value added in the overall economy by these sectors in 2005. The responses obtained from our survey are evaluated using a diffusion index: the balance for each indicator represents the difference between the percentages of companies reporting a positive or negative trend. It does not therefore represent a percentage rate of change. A comparison indicator has also been developed so that the barometer does not only provide information on the economic health of SMEs over the course of time, but is also able to allow a comparison to be made with large companies. It is defined as the balance of the SME business climate less the balance for large companies. Irrespective of the absolute economic situation, a rise indicates a relative improvement of SMEs in comparison with large companies, while a decline indicates the reverse.
Appendix: UBS SME barometer in figures
Economic & Swiss Research
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Schweizerischer Gewerbeverband (SGV)
Dr. Rudolf Horber
SGV Political Secretary / Member of the SGV Executive Board
Tel. +41 31 380 14 34
Edgar R. Minder
SGV Press Officer
Tel. +41 31 380 14 41
* The Schweizerische Gewerbeverband (SGV - Swiss Industry and Trade Association) is the umbrella organisation for small and medium-sized enterprises. It was founded in 1879 and is now the biggest business association in Switzerland. The SGV is active in representing the interests of some 300,000 small and medium-sized enterprises, most of which are members of approximately 250 industry and professional associations and of the cantonal industry and trade associations, which are organised on a multi-sectoral basis.
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