Swiss Industry Switzerland: Light at the end of the tunnel?

Author / Editor: Sergio Caré / Susanne Hertenberger

The Swiss MEM industry was able to hold itself together in 2016 after a difficult previous year. The order receipts as well as sales turnovers could recover somewhat. The margin situation however, remains tense as ever.

Deeper margins, but light at the end of the tunnel for the Swiss industry: Export slump arrested.
Deeper margins, but light at the end of the tunnel for the Swiss industry: Export slump arrested.
(Source: Swissmem)

After a very difficult 2015, the MEM industry was able recover a little in the previous year in the areas of order inflows (+9.5%) and export. In sales turnovers too, a turnaround was witnessed in the fourth quarter. Regarding the future potential for incoming orders, future expectations of the companies - both large enterprises as well as SMEs - registered continuous improvement during the previous year. According to the latest Swissmem survey, 49 percent companies expect an increase in order bookings from foreign countries in 2017. Only 14 percent fear a decline. This cautious optimism is shared by large enterprises as well as SMEs.

Alarming margin situation

A different picture emerges from the results of a Swissmem survey conducted towards the beginning of this year on the income situation in the companies: Nearly a quarter (23%) of the companies was at the EBIT level in the loss zone in 2016. One third (34%) of the companies achieved a positive but unsatisfactory EBIT margin of less than 5 percent in 2016. In comparison, only seven percent of the companies were in the loss zone in 2014 and 23 percent between the zero and five percent EBIT margin. Small enterprises were affected more comparatively, but the difference between the medium-sized and large enterprises was not very pronounced. «These figures are alarming», says Swissmem President Hans Hess. «The bottom line is that 57 percent of the companies did not earn any margins or earned only insufficient margins which could be invested in the future, two years after the reversal of the minimum value of the Euro.» These results show clearly that the reverses suffered by the Frank are not yet over for a large number of companies especially SMEs. Matters are confounded further by the fact that the value of the Swiss Frank has risen continuously against the Euro in the last few months.

The structural changes are continuing

The difficult situation in the MEM companies has also had an effect on the number of employees. Towards the end of 2016, there were 317,600 employees in the MEM industry. A total of 12,600 jobs were lost in the last two years on the whole. The number of published job offers of the Swissmem member companies has started increasing again since the beginning of 2016.

The accelerated structural change is expected to continue in 2017 too. According to the still-unpublished «Swiss Manufacturing Survey» of the Institute for Technology Management of the St. Gallen University, 46 percent of the companies in the industrial sector are planning to relocate to foreign countries in the coming three years. The most important reason for this is reduction of production costs. Besides product- and process innovations, this is the only way the companies can increase profitability in Switzerland. This fact tallies with the assessment of the respondents regarding the jobs that will be affected. The respondents are of the opinion that job opportunities in production will shrink, and those in the areas of research, development and project management will increase.