Businesses prepare to dig into their pockets

Investments by the chemical industry should be strong this year Keystone

The improved economic outlook for Switzerland this year has convinced more companies that now is the time to invest.

A survey carried out by Zurich’s Institute for Business Cycle Research (KOF) late last year shows more firms are preparing to spend in the coming months than in 2005.

“Investment activities are important for the economy because they account for a large part of the variations of the country’s gross domestic product,” said KOF’s Daniel Lampart in Zurich on Friday.

In the industrial sector, more than 54 per cent of the firms surveyed said they would make investments this year, up seven per cent over the previous survey. Chemical companies as well as firms active in precision engineering and electronics are the most likely to loosen the purse strings.

Service companies are also more confident about spending this year, with over 46 per cent considering investments, up from 40 per cent in 2005. Communications firms and distributors are leading the charge.

Transport companies and retailers said on the other hand that they were less enthusiastic about investing in 2006.

Less optimistic

The building sector is less optimistic according to the KOF survey. Less than 16 per cent of companies say they want to invest this year, while the figure was nearly a quarter in the previous poll.

While the survey showed that most companies planning investments were interested in rationalising production and replacing buildings and equipment, KOF said that expansion of activities was given more often as a reason for spending this year.

In 2003, only eight per cent of industrial firms were investing as part of an expansion drive. But by the end of last year, that figure had risen to 20 per cent.

Among the biggest hurdles to investing cited by companies was a lack of available manpower, but the main problem for these firms was the risk of insufficient return on their investment.

Investments abroad should remain stable this year. Just over a third of the firms polled said they would be spending outside Switzerland.

Nearly half of those which invest abroad spend funds on setting new production sites. Almost the same number said they would also put money into setting up an after-sales service or distribution network.

Just one fifth of the companies that responded to the survey also said they were considering moving their production outside Switzerland.

swissinfo with agencies

Key facts

The Swiss Institute for Business Cycle Research questioned 6,800 firms during the last quarter of 2005.
Results:
54.4% of industrial companies plan to invest this year (47.5% last year).
46.5% of services firms (40.1% previously).
15.8% of construction companies (24.6 in 2005).