Strengthening franc spells bad news for Swiss exporters to Europe

The Swiss franc's strength against the euro is bad news for Swiss business as the price of Swiss exports to the European Union goes up. The Swiss currency has gained around four to five per cent against the euro since the beginning of the year.

Before then, the franc and the euro had moved to a large extent in parallel, with the euro worth around SFr1.60. However, since the Swiss National Bank’s decision to move Swiss interest rates higher independently of the European Central Bank, the Swiss unit has been gaining ground. At present the euro buys around SFr1.55.

About two thirds of Switzerland’s foreign trade is directly with countries in the EU, most of them now using the euro.

Swiss technology company Von Roll does half of its business with partners in the EU and is concerned by the franc’s rise.

Von Roll’s corporate treasurer Reiner Ratier says that the Swiss franc’s appreciation ‘has a serious impact on our pricing and our chances for export.’

‘We have to once more strengthen our efforts to reduce our production costs here in Switzerland to maintain our competitiveness,’ he adds.

However, not every Swiss business is billing its customers in Swiss francs. Elevator and escalator manufacturer Schindler now bills all its customers in euros, whether or not the goods originate here in Switzerland.

The strength of the Swiss economy compared to the Euroland economies is another factor why the Swiss franc is gaining ground against the euro. However, this hasn’t stopped Swiss businesses calling on the Swiss National Bank to try to maintain a stable franc-euro exchange rate.

Reiner Ratier says that a return to a more stable franc-euro rate would assure the longer term prospects of Swiss businesses trading with EU partners.

Report by Tom O’Brien