Swiss SMEs: Turnover to return soon to last year's level
According to the latest UBS survey conducted in December and January, business improved slightly for small and medium-sized enterprises (SMEs) in the fourth quarter. The pace of declining cash flows and turnover slowed considerably and staff cutbacks were halted. Companies are not anticipating a substantial improvement in business in the first quarter, but the industrial and service sectors are still expecting turnover to stabilize at last year's level.
Compared to the previous year, turnover for small and medium-sized enterprises (SMEs) declined slightly less in the fourth quarter of 2009 than in the third quarter. The companies surveyed expect a further slight improvement in the first quarter of 2010. But, while industrial and service-sector SMEs are optimistic and even anticipate turnover to stabilize at last year's level, those in tourism, the retail sales and construction expect business to continue to decline in the first quarter.
Staff cutbacks in industry continue apace
Staff cutbacks in industrial SMEs continue unabated, despite signs pointing to a slow stabilization of turnover and earnings. The downward spiral slowed in the fourth quarter of 2009, and the companies surveyed said that they expect to maintain last year's level of earnings and sales in the first quarter of 2010. However, price pressure appears to be as strong as ever. The business climate a synthetic indicator calculated on the basis of the survey findings regarding output, turnover and new orders is also improving. The companies surveyed also expect the business climate to stabilize in the first quarter of 2010. A comparison of the SME survey results with those of large Swiss companies reveals a very similar business trend.
Service providers: Trend reversal at the start of the year
SMEs in the service sector were less affected by the crisis than their larger competitors and the industry in general. Declines in turnover and earnings were lower, and employment remained relatively stable. Following a slight improvement in profit and turnover in the fourth quarter, with profit reductions and sales shortfalls somewhat lower than the previous year, SMEs in this sector expect a stabilization of turnover and profits at previous year's levels in the first quarter of 2010.
Tourism continues to suffer
In the tourism sector, SMEs and large companies are taking longer to recover from the crisis. This is demonstrated by a further slump in earnings and a decline in cash flows and profits, which is continuing largely unabated. Although it is expected that the downward spiral will slow slightly in the first quarter of 2010, SMEs still see no return to growth ahead and are continuing to shed jobs.
Retail sector SMEs have the edge
The survey results reveal that the price pressure on SMEs is not as high as for large retail traders and that they are even expecting some relief in the first quarter. Staff levels are also comparatively stable, and SMEs are not planning to make headcount reductions in the first quarter. Turnover and cash flows in the first quarter 2010 should reach the previous year's levels.
Building sector characterized by price pressure
The price competition in the building sector shows no sign of easing, neither for SMEs nor their larger competitors. Profits continue to suffer, although the decline was slightly lower in the fourth quarter. Turnover remains stable, and there was even a slight rise in staffing levels year-on-year. However, the anticipated development in the first quarter of 2010 indicates a more difficult business environment. SMEs expect turnover to come under pressure again, possibly leading to deteriorating cash flows and profits.
Modest investment plans
According to the survey 2009 investment activity of SMEs held to its long-term average, although industrial and retail SMEs reported lower-than-average investments. In all sectors, except retail, SMEs anticipate average investments in 2010. They also see no need for regeneration, and the expansion of capacity is not being considered across a broad front.
The Swiss economy is recovering from the crisis of previous quarters, leading to an increase of positive signals for SMEs, as shown by the results of UBS's last quarterly survey conducted in cooperation with the Swiss Trade Association and within the context of the UBS SME barometer. About 450 SMEs and 180 large companies were surveyed from mid-December 2009 to mid-January 2010 for comparative purposes.
Methodology of the UBS SME barometer
The UBS SME barometer is based on an evaluation of the UBS survey on manufacturing that the bank has carried out since 1975. This survey was extended to include service providers in the third quarter of 2006. Around 1,300 companies (1,000 SMEs and 300 large companies), forming a representative cross-section of the Swiss economy, are surveyed every quarter. Companies with fewer than 250 employees are classed as SMEs. Survey responses 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 on the basis of the survey results for output, incoming orders and revenue in the manufacturing sector. Data on cash flow and on an industry-specific level have been collected since the first quarter of 2009.
Previous 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 is 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.
Carla Duss, WMR Economic Research Switzerland
Tel. +41-44-234 21 19
Caesar Lack, Head WMR Macroeconomic Research Switzerland
Tel. +41-44-234 44 13
Schweizerischer Gewerbeverband (sgv)
Dr. Rudolf Horber, Chief Economist sgv
Tel. +41-31-380 14 34
+41-78-813 65 85
Hans-Ulrich Bigler, Director sgv
Tel. +41-79-285 47 09
The Schweizerische Gewerbeverband sgv (sgv Swiss Industry and Trade Association) is the umbrella organization for small and medium-sized enterprises. It was founded in 1879 and is now the largest business association in Switzerland. The sgv represents the interests of some 300,000 small and medium-sized enterprises. Most of these companies are members of approximately 250 industry and professional associations and of cantonal industry and trade associations, which are organized on a multi-sector basis.