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UBS SME barometer 3rd quarter 2008 - SME sector: Service-providers ahead by a nose
The business climate among Swiss SMEs remained positive in the second quarter. However, the latest UBS survey confirms that the solid growth momentum of recent quarters is fading a bit. As in the previous quarter's survey, service-providers again fared better in the second quarter than industrial companies among Swiss SMEs.
Signs are growing that the Swiss economy will have to be content with more modest growth in the coming quarters. Although on balance 34% of the small- and medium-sized enterprises (SMEs) surveyed by UBS thought the business climate had improved in the second quarter, this figure was significantly below the 48.5% average of the previous four quarters. Expectations for the third quarter indicate that the proportion of SMEs with an improving business climate is set to drop off once again. Similar trends can be seen in figures for new orders, total sales, earnings and order backlogs. Nevertheless, SMEs are steadily continuing to recruit more staff. On balance, 21% increased their staff, which is roughly in line with the average over the past four quarters. These are some of the findings presented in the latest UBS quarterly survey. The survey, which traces 700 Swiss companies, is part of the UBS SME barometer and is made in cooperation with the Swiss Industry and Trade Association.
Service-providers and large companies are more optimistic
In the previous quarterly survey, SMEs in the services sector expressed above-average levels of contentment with business results and these companies were also more optimistic for the next quarter. In the second quarter, these expectations proved a bit excessive in some cases. In fact, the new survey indicates that some companies are currently operating in a rather challenging environment. On balance in the second quarter, 24% of industrial SMEs reported an improved business climate, 17% an increase in new orders, 30% a rise in total sales and 22% an expanding workforce, while the number of companies signalling an increase in earnings roughly matched those indicating a decrease. The corresponding figures among service-provider SMEs were 40% with an improved business climate, 34% with an increase in new orders, 46% with a rise in total sales, 20% with an expanding workforce and 23% with increased earnings. Expectations for the third quarter point to a continuation of this trend. The current survey also confirmed that, in comparison to large companies, Swiss SMEs are facing stiffer challenges. As a result, sales, business climate trends and expectations for this group are significantly weaker than for the large Swiss companies.
Increased commitment to new staff
In the current year, 79% of Swiss SMEs are training apprentices, with the average company employing six trainees. The intentions expressed in the latest survey paint a more encouraging picture for the future: 80% of SMEs will maintain their staff training programs at existing levels for the current year, while 15% actually plan to expand the number of apprenticeships offered. This means that Swiss SMEs are committed to training new specialists.
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
Head Economic & Swiss Research
Tel. +41 44 234 35 54
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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