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Swiss SMEs: Employment increasing again
The Swiss economy continues to grow. The companies surveyed by UBS are forecasting a continuing improvement in the business climate, and in the near future – despite a possible slowdown in growth – see no cause for concern. The earnings and cash flow of small and medium-sized enterprises (SMEs) have stabilized, and there has been a year-on-year increase in the workforce.
Swiss SMEs were able to slightly bolster their sales in the third quarter. However, the results vary depending on the sector and industry. This is reflected by a survey that UBS conducts on a quarterly basis, in cooperation with the Swiss Trade Association (SGV), within the context of its SME barometer. In industrials, the service sector and the tourism industry companies increased their sales volume; companies in the building and retail sectors, however, were only able to keep their revenues stable. On average, SMEs slightly increased their employment level and stabilized their cash flow and profit. In the area of sales prices alone, a slight deterioration was detectable in comparison to the previous year, though the downward trend reflected by this indicator has slowed somewhat.
The building industry is still struggling
In the building industry, the situation remains tense for SMEs. Even though sales volumes stabilized and the workforce increased slightly in the third quarter, building contractors continue to see a deteriorating trend in sales prices, profit and cash flows as compared to the previous year. According to the forecast of the companies surveyed, this trend will not change in the next quarter. The situation is similar in large companies, though large companies achieved better sales results in the third quarter and significantly improve their business results.
As in the previous quarter, SMEs in the manufacturing sector improved their revenues and said they expect this trend to continue in the next quarter. This also applies to cash flow. In the case of both revenue and cash flow, SMEs perform slightly better than large companies. No differences can be observed in the employment level, which has stabilized in comparison to the previous year, in either large or small companies.
In the service sector, SMEs have not recovered as well as the large companies. However, SMEs on average suffered somewhat less during the economic crisis. They improved their profits and cash flow last quarter, though not to the same degree as companies with 250 or more employees. The same holds true for sales prices, where the result varies depending on the size of the company. The large companies managed to slightly raise their sales prices, while SMEs only stabilized them. Based on the expectations of the companies, these differences will continue in the next quarter.
In the tourism sector, SMEs have the edge
After going through an extended lean period, the companies in the tourism sector can slowly breathe a sigh of relief. SMEs slightly increased year-on-year sales, cash flow and profit for the first time since the economic crisis. Large companies performed similarly but only managed to hold cash flow stable at the previous year's level. All companies were able to stabilize employment and sales prices.
In the retail sector, the sales prices and profits of SMEs fared somewhat better than those of their bigger counterparts. Like large companies, SMEs were also affected by a deterioration in sales prices in comparison to the previous year, though it was not as bad. The picture is similar for the employment indicator. In stark contrast, cash flow and profit indicators behaved in an opposite manner, with large corporations achieving a significantly better result than SMEs.
About 44% of the service sector companies surveyed responded that their administrative workload remained constant in a year-on-year comparison, while 49% expected a slight increase. Only about 3% expected the work in this area to decline. In the current quarter, more than half (53%) of the industrial firms surveyed mentioned that their administrative workload increased, 38% determined that there was no year-to-date change, and only about 4% noted "a significantly increased workload."
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.
Notes: 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.
Dr. Daniel Kalt, Chef Economist Switzerland, UBS
Tel. +41-44-234 25 60
Dr. Caesar Lack, UBS Research Switzerland
Tel. +41-44-234 44 13
Sibille Duss, UBS Research Switzerland
Tel. +41-44-235 69 54
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 255 industry and professional associations and of cantonal industry and trade associations, which are organized on a multi-sector basis.