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Times still hard for SMEs - Apprenticeship market intact
The slump in business suffered by small and medium-sized enterprises (SMEs) in Switzerland in the first quarter, persisted during the second quarter. Revenues and cash flows fell further and even minor staff cutbacks continued. A sector comparison revealed that industrial SMEs appear to be suffering most in the current economic environment, but they expect the situation to improve in the third quarter. The survey findings on apprenticeships are more encouraging.
The results of the latest survey, which UBS conducts on a quarterly basis within the context of the UBS SME barometer in cooperation with the Swiss Trade Association showed that Swiss SMEs are still struggling in the face of economic turbulence. Thus, revenues and profits continued to fall in the second quarter, while the employment trend was once again negative. Expectations for the third quarter show no signs of improvement: Revenues and cash flows are likely to decline further, while price pressure is expected to increase marginally, and even developments in the workforce are showing no signs of reversing the trend.
Three quarters of the SMEs we surveyed advertised apprenticeships in the last year; who on average employed 5.5 apprentices. The survey indicates that the number of available apprenticeships in the service sector and in tourism is likely to rise slightly, while trainees in the retail sector are expect to face a dearth of vacancies. Overall, 83% of all SMEs surveyed are not planning any changes to the number of apprenticeship vacancies in the current year, 9% plan an increase and 8% a reduction. According to our survey, the number of vacancies on the apprenticeship market is unlikely to change to any significant extent.
Industrials bring up the rear
The business climate among industrial SMEs - calculated on the basis of the survey findings on output, revenues and new orders - deteriorated once again in the second quarter. The SMEs had to endure a repeated drop in profit and cash flows. Many industrial SMEs are suffering in the face of the slump in global trade. Incoming orders fell significantly year-on-year; more so in the export segment than in domestic trade. As a result, there were widespread production cutbacks, incoming orders tailed off and a further cut in production is likely in the coming months. Although the SMEs see the third quarter slightly less sceptically, the outlook remains gloomy and according to estimates of those surveyed, the business climate is expected to remain considerably negative.
SMEs in the service sector are relatively well positioned
Compared with larger service enterprises, the SMEs in the service sector posted a less pronounced drop in cash flows. Even their revenues dropped less severely, resulting in only minor staff cutbacks for the service providers among SMEs. The expectations for the third quarter are slightly more optimistic. Having said that, redundancies are set to continue at a slightly increased rate.
Less holiday spirits - The tourism industry is in the doldrums
The tourism industry is suffering from falling visitor numbers. According to our survey of SMEs, the second quarter saw the number of foreign tourists fall more drastically year-on-year than domestic tourists. These numbers are likely to have been influenced by the EURO08 football championships hosted by Switzerland last year. By contrast, the absence of Swiss tourists in the second quarter is likely to be attributable among other things to the deteriorating consumer sentiment and falling job security. SMEs were better able to withstand the price pressure in the tourist segment that their larger competitors. The cost of lodging is primarily exposed to the downtrend. Prices in the food service sector remained stable.
These price trends are expected to continue during the third quarter. However, the industry representatives surveyed, expect the decline in the number of foreign guests to pick up; the corresponding development of Swiss tourist numbers is likely to remain on par with the prior quarter. The SMEs expect profit and cash flows to drop off even more and plan further staff cutbacks.
Subdued consumer demand: Food revenues stagnating, other product segments suffering
Although the situation of the small and medium-sized retail enterprises improved slightly in the second quarter, (the drop in overall revenues and cash flows was less pronounced than in the prior quarter), retailers were pessimistic with regard to the trend in the third quarter: They anticipate significant dips in profits, cash flows and overall revenues. While revenues are predicted to stagnate in the food industry, SMEs in the retail segment expect revenues to fall even more dramatically, especially in the area of textile sales, but also in terms of business with other non-foods.
SMEs in the building sector under price pressure - they are not the only ones
Compared to other industries, SMEs in the building sector fared relatively well, recording lower declines in overall revenues and no staff cutbacks in the second quarter. Having said that, price pressure is greatest in this sector, with SMEs affected just as severely as their larger competitors. Since the start of the year the general trend in cash flows and revenues of the SMEs survey was negative. This is unlikely to change in the third quarter. The small and medium-sized building enterprises expect their business environment to become even more difficult given a further increase in price pressure, an increasing decline in overall revenues and rapidly falling incoming structural and civil engineering orders.
Changes in the UBS SME barometer
The UBS SME barometer was revamped this summer and now provides more detailed findings on individual industrial groups such as industrials, service sector, construction, tourism and retail. 603 small and medium-sized enterprises and - for comparison purposes - 177 large companies participated in the survey held in May/June.
Methodology used to determine 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, which was extended to include service providers starting in the third quarter of 2006. Around 1,300 companies (1,000 SMEs and 300 large companies), which form a representative cross-section of the Swiss economy, are surveyed every quarter. Any companies employing fewer than 250 employees are classed as SMEs. 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, negative or very negative trend. It therefore does not represent a percentage rate of change.
The business climate is calculated exclusively for the industrials on the basis of the survey results on output, incoming orders and revenue. Data on cash flow and at an industry-specific level have been collected since the first quarter of 2009.
Notes: Prior-quarter trends are extrapolated actual results (grey bars). Current-quarter trends are companies' expectations (shaded bar). The respondents were asked about the change compared to the same quarter in the previous year. The collected data are evaluated using a diffusion index. The results can range between -100 and +100, with results at or around zero [-5;5] representing stagnation, results up to -50 (+50) representing a deterioration (improvement) and results below -50 (above +50) representing a major deterioration (improvement). The data do not represent a percentage change in the parameter.
WMR Economic Research Switzerland
Tel. +41-44-234 21 19
Head WMR Macroeconomic Research
Tel. +41-44-234 25 60
Schweizerischer Gewerbeverband (sgv)
Dr. Rudlof Horber
Tel.: +41-31-380 14 34
Tel.: +41-79-285 47 09
The Schweizerische Gewerbeverband sgv (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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