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SME: severe setbacks in exports

Zurich / Basel | | Media Releases Switzerland

Small and medium-sized enterprises (SMEs) in Switzerland had expected a decisive cut in business activity in the first quarter. However, the actual downtrend turned out to be considerably more severe than anticipated in the previous quarter, particularly for the exports of SMEs. Against a backdrop of falling revenues, profits and sales prices, SMEs have started to downsize their workforces.

The first quarter of 2009 turned out to be tougher for Swiss small and medium-sized enterprises (SMEs) than expected in the previous quarter. Sales dropped year-on-year, profits plunged and sales prices fell for the first time since the start of 2006. No turnaround is expected for the second quarter. This was the result of the latest survey that UBS conducts on a quarterly basis within the context of the UBS SME barometer in cooperation with the Swiss Trade Association. Around 600 SMEs and - for comparison purposes - 170 large companies participated in the survey held in March.

A difficult first quarter
The business climate among SMEs - both service providers and industrial enterprises - deteriorated significantly during the first quarter. However, the effects of the global downswing have so far been more severe in the secondary sector, since in this segment price pressure was stronger, the slump in earnings was larger and export sales shrank more dramatically during the first quarter than was the case with service-based SMEs. Both sectors experienced a distinct drop in sales. The volume of new orders received by industrial SMEs fell sharply, with overseas orders more heavily affected than domestic orders. Despite production and staff cutbacks, incoming orders tailed off. Although in the last survey the SMEs had expected economic momentum to dwindle again in the second quarter, they were caught out by the extent of the cyclical downturn.

No prospects for improvement in 2nd quarter expected yet
The companies surveyed do not expect a turnaround to kick in during the second quarter: Year-on-year sales and profits are likely to post a similar drop to the prior quarter. The pressure on sales prices is likely to increase and there will again be redundancies. Incoming orders in the industrial SME segment are expected to remain as weak as in the first quarter, while production cutbacks are set to be equally drastic.

Compared to large companies, SMEs fared equally poorly in terms of export development. While the large companies experienced a sharp decline in incoming orders for exports, SMEs had to stomach a hefty drop in export sales. The steep fall in overall sales resulted in a lower value for the collective indicator "business climate" for SMEs. Big enterprises also anticipate a challenging business environment in the second quarter with declining sales and profits as well as staff cutbacks.

Swiss SMEs see hardly any signs of a credit crunch
According to the UBS survey conducted in March, the availability of credit has not worsened compared to the previous year. In this regard, companies in the construction sector did not notice any change at all. Compared to other sectors, access to credit for small to medium-sized retailers slightly worsened, although there can still be no mention of a credit crunch here either. Compared to the large companies, SMEs even see the situation in a more positive light.

UBS SME baromter

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 (4Q07 TO 3Q08); weighted average of the "strong gains", "gains", "losses" and "strong losses" reported (year-on-year) according to the UBS survey (4Q08 to 1Q09); business climate = average of profit and sales results

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 1300 companies (1000 SMEs and 300 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 results 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 RESULT represents the weighted average of the percentages of companies reporting a very positive, positive, very negative 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 result of the SME business climate less the result 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: SME business climate in figures

Contacts:

UBS AG

Carla Duss

WMR Economic Research Switzerland

Tel. +41 44 234 21 19

Felix Brill

Head WMR Economic Research Switzerland

Tel. +41 44 234 35 54

www.ubs.com/kmu

Schweizerischer Gewerbeverband (sgv)

Dr. Rudolf Horber

Chief Economist

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.