Smaller firms hit hard by economic woes

Swiss SMEs are worried about the future Keystone

Swiss small and medium-sized enterprises (SMEs) are suffering the delayed effects of the economic downturn - far later than their larger counterparts.

This content was published on April 16, 2003 minutes

A new survey says smaller firms, which form the backbone of the Swiss economy, are pessimistic about the future.

According to the Swiss small and medium enterprise association, SMEs account for 99.6 per cent of the 300,000 registered business in Switzerland and 75 per cent of all employees.

But the study by the country's biggest bank, UBS, found that SMEs had not only been hit hard by the current economic climate but were facing a slower recovery.

Karin Schefer, an economist at UBS, said the situation could be explained by the type of work carried out by SMEs.

"Many small and medium enterprises are subcontracters and so in the business cycle they are hit later than the big enterprises," she told swissinfo.

Reliance on exports

Winter 2002 seems to have hit these companies the hardest as the domestic market weakened and companies relying directly or indirectly on exports saw the largest drop in their activities.

Schefer said UBS wasn't suprised by the results.

"We expected that... because exports and also consumer confidence are in bad shape at the moment," she said.

"The earliest point we expect an upswing in the economy is the end of the year but until then the momentum is still difficult," added Schefer.

Hard hit sectors

UBS said the worst affected sectors were the watch industry, followed by the electronics and civil engineering sectors.

But it added that these branches had now seen the worst of the downturn, although none had fully recovered.

"No sector has registered a global trend towards improvement and only the information technology sector has been able to maintain an almost stable economic activity," said UBS.

The bank added that the tough economic situation had resulted in a drop in sales and orders. To remain afloat SMEs in all sectors had resorted to cutting staff.

"Yet having done that they remain more cautious in their outlook than larger companies, confirming once again their stabilising role in the employment market," reported UBS.

Cautious outlook

The survey found that while large firms were already reckoning on a gradual stabilisation by the summer, the SMEs were expecting only that the economic downturn would start to slow down.

The civil engineering, mechanics and watch sectors were particularly counting on an easing of the economic situation, the report said. Only IT companies were predicting an improvement in business.

The building and hotel industries were more pessimistic about their economic outlook.

The survey also found that for the first time in six years, SMEs were intending to slightly reduce their investments.

Glimmer of hope

But the survey did provide a glimmer of hope among the bad news. With the exception of the construction and tourism sectors, where orders continue to fall, firms were expecting a smaller downturn in orders than that experienced during winter.

One in six even predicted an increase in orders. But UBS said that would not be enough to protect employees.

"A weak glimmer of hope that won't however be enough to put a stop to staff cuts," it said.

swissinfo with agencies

Key facts

SMEs account for 99.6% of registered businesses.
The majority have less than ten employees.
75% of the workforce is employed by SMEs.
SMEs make up the backbone of the Swiss economy.

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