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UBS SME barometer: Pessimistic start to the new year for SMEs
Having already cooled off at the start of 2011, the business climate continued to deteriorate in the fourth quarter of last year. Small and medium-sized enterprises (SMEs) overall, especially industrials, nevertheless rated their economic situation slightly better than large companies. For the new year SMEs anticipate further clouding of the business climate.
The decline in the sales prices, cash flows and earnings of SMEs accelerated in the fourth quarter of last year. In the first instance, sales were lower than in the previous year. For the first quarter of the current year, SMEs are expecting further major declines, especially in sales and earnings. While SMEs rated the fourth quarter of the past year slightly better than large companies, their assessment of the first quarter of 2012 matches that of large companies – both expect a further slowdown in business. We consider this may be the reason why SMEs anticipate a decline in employment for the first time in over two years.
In the industrial sector, the situation worsened continuously over the course of the past year. Despite this, both SMEs and large companies still reported unchanged headcounts in the fourth quarter. The SMEs, however, expect workforce reductions primarily in the first quarter.
Compared to other sectors, the construction industry is still faring well and sales and employment remained constant in the fourth quarter. That said, falling prices are causing problems in the construction industry, manifested in a slight decline in earnings experienced by SMEs and major enterprises alike. Small and medium-sized companies express a markedly worse outlook on the first quarter of this year than large companies do.
Rising level of employment among SMEs in the retail sector
In the service sector, however, SMEs assess the situation more positively than large companies. The cash flows and earnings of large companies declined in the fourth quarter of last year. In addition, since the middle of the year, SMEs and large companies both had to make significant concessions regarding sales prices. Unlike large companies, SMEs expect headcounts to increase in the first quarter of this year.
In the retail sector, large companies in particular have come under considerable pressure since the middle of last year. Their earnings, sales, sales prices and cash flows fell significantly faster than those of SMEs. These, however, also report significant declines. Headcounts represent a major differentiator – while these remained unchanged for SMEs in the past year, large companies made substantial reductions. SMEs in the tourism sector also post slightly better figures than large companies. Since the middle of last year, however, the situation also clouded considerably for SMEs; they expect a further significant downturn for the first quarter of this year.
Despite the strong franc, the majority favors a flexible exchange rate
In the most recent UBS survey, companies were interviewed about a number of exchange rate issues. The question as to whether pegging the franc to the euro or even adopting the euro might be beneficial for their business in the long term received a positive response from 37% percent of the companies surveyed. Some 63% of the companies surveyed consider flexible exchange rates an advantage. Support for flexible exchange rates, however, varies from one sector to the next. Opposition to flexible exchange rates comes primarily from export-oriented sectors such as the electronics and materials industries. Support of flexible exchange rates is found in sectors oriented towards the domestic economy such as real estate or the construction industry.
Some 33% of the companies surveyed said that they had benefited from the introduction of the euro. Another third responded that the introduction of the common currency had not had any impact on their business. The remainder indicated that they had not benefited from the introduction of the euro.
Dr. Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60
Dr. Caesar Lack, Wealth Management Research
Tel. +41 44 234 44 13
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.
Methodology of the UBS SME barometer
The UBS SME barometer is based on an evaluation of the UBS survey of the industrial sector 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 contacted 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.
SME business climate in figures
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.