Switzerland enjoys new company boom

The construction industry is going through a boom period Keystone

Thousands of new businesses have been started in Switzerland to take advantage of the buoyant economy, which grew three per cent last year.

According to figures released on Wednesday by debt collection agency Creditreform, the number of new firms opening for business in 2006 rose by over a third to 10,700.

The construction sector, which includes architecture, engineering and construction material firms as well as estate agencies, registered the strongest growth, soaring by 75.6 per cent to 2,190 new companies, mostly in cantons Fribourg, Valais and Graubünden.

Geographically, the overall number of new businesses seems to be clearly linked to cantonal fiscal policies.

Cantons Obwalden, Appenzell Inner Rhodes and Zug, which are among those with the lowest tax regimes, saw the highest number of new entrepreneurs starting out on their own.

Canton Obwalden, which offers a business tax rate of 6.6 per cent, attracted 376 new firms in the first 11 months of 2006, three times more than in the previous year. Voters there chose to cut tax levels in 2005 in a bid to attract new residents and companies.

Closing down

Among the 4,528 businesses that went bankrupt in 2006 in Switzerland, Creditreform found that the restaurant sector was hit hardest. A total of 641 cafes and restaurants put up the closed sign once and for all, a 1.1 per cent increase on 2005.

Although the number of newly registered construction firms grew by 9.8 per cent, those shutting down also went up by 14.6 per cent. And there were 237 insolvencies, a 32 per cent rise.

Both the restaurant and construction sectors are characterised by a large number of very small companies that often have unstable financial situations according to Creditreform. Their industry associations often complain about too many competitors active in each sector.

General trend

In November 2006 the weekly business newspaper Handelszeitung carried out a survey which found that many top firms were planning to create thousands of new jobs in 2007.

The State Secretariat for Economic Affairs (Seco) also predicts unemployment to drop from the current 3.1 per cent to 2.8 per cent in 2007.

But economists have warned firms to brace for the effects of a temporary global slowdown this year and the early signs are already visible in Switzerland.

The fast pace of economic growth prompted the Swiss National Bank (SNB) to increase interest rates by 25 basis points for the fifth consecutive time in December 2006 to set raise its benchmark target rate to two per cent. The SNB expects two further rises in 2007.

The general consensus among economists is that Switzerland will feel the effects of a cooling in the US economy next year, but that slowdown will result in a soft landing.

A range of leading economic indicators predicts a growth in gross domestic product of between 1.7 and 2.2 per cent in 2007.

swissinfo with agencies

Key facts

OECD forecasts for country GDP growth rates:
Switzerland: 3% (2006), 2.2% (2007), 2% (2008)
Eurozone: 2.6% (2006), 2.2% (2007), 2.3% (2008)
United States: 3.3% (2006), 2.4% (2007), 2.7% (2008)
Japan: 2.8% (2006), 2.0% (2007), 2.0% (2008)