UBS SME barometer: Situation of SMEs varies according to sector
In the construction industry, in tourism and above all in the retail sector, SMEs fared better in the second quarter than large corporations. In industry, however, the opposite applies. Retail companies continue to struggle in a difficult business environment, with large companies forced to accept a massive worsening of their situation, particularly with regard to turnover and sales prices. Overall, falling prices present a persistent problem, regardless of company size.
Both SMEs and large companies were able to increase their turnover in the second quarter. Among SMEs, the tourism sector reported some difficulties due to the strong Swiss franc and was only able to stabilize turnover compared to the previous year. However, SMEs did succeed in slightly expanding their workforces. Sales prices, earnings and cash flows remained stable year-on-year. At +34 points, the business climate for large companies in the industry remained in clearly positive territory in the second quarter, suggesting a solid course of expansion. The index value of 4 for SMEs, on the other hand, implies continued stagnation.
Large companies in the manufacturing sector fared slightly better than SMEs in terms of turnover and employment. In the second quarter they hired slightly more new employees and also achieved better turnover results. As for sales prices, earnings and cash flow, both groups of companies remained stable at the previous year's level, with the exception of improved profits for large companies. Profit and cash flow figures for the last seven quarters reveal a similar pattern: Following a rapid and solid post-crisis recovery, growth in the two indicators slowed among SMEs, remaining at a stable level for the last three quarters.
SMEs perform better in the services and construction sectors
Service companies were able to boost turnover regardless of their size. Sales prices also remained stable for both groups of companies in the second quarter. In terms of staffing levels, earnings and cash flow, SMEs did better than larger companies. At the end of the day, the positive expectations in earnings expressed by large companies in the last survey failed to materialize as profits slumped in the second quarter.
In the construction sector, SMEs did better than their large counterparts in all surveyed indicators, as was already the case in previous quarters. Despite an ongoing battle with falling prices and profits in the second quarter, their losses were lower than those of large companies. Cash flow worsened again for large companies after a stable year, while the situation was exactly the opposite for SMEs. Heading into the third quarter, both groups of companies expect all indicators to hold steady or to worsen, with the exception of large companies' expectations of improved earnings.
Bleak outlook persists in the retail sector
As in the last quarter, large companies and SMEs made marginal staffing cutbacks in tourism, with the outlook also looking bleak for the current quarter. While large companies still expect the situation to stabilize, SMEs fear further job cuts. Having improved their general turnover situation again in the second quarter, SMEs are expecting stabilization in the third quarter. Despite lower turnover, large corporations are banking on stable earnings.
Large companies are coming under increasing pressure in the retail sector. While SMEs endured declining earnings, cash flows and sales prices, large companies in fact fared far worse. All their indicators worsened, and they assume nothing will change going into the third quarter. The strength of the franc is currently favoring some sections of the industry that import their goods from European countries. Sinking prices could point to a faster transfer of these savings to the consumer through currency conversion.
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.
Dr. Daniel Kalt, Chef Economist Switzerland
Tel. +41 44 234 25 60
Sibille Duss, Wealth Management Research
Tel. +41 44 235 69 54
Schweizerischer Gewerbeverband (sgv)
Tel. +41 31 380 14 38
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 255 industry and professional associations and of cantonal industry and trade associations, which are organized on a multi-sector basis.