Switzerland continues to draw multinationals

UPS says it will deliver 100 jobs to the town of Biel Keystone Archive

Parcel delivery firm UPS is the latest multinational to be seduced by Switzerland – it has named Biel as the European headquarters of its logistics division.

Since the 1950s, almost 200 large foreign companies have moved either their global headquarters or part of their operations to Switzerland.

The announcement by UPS – the world leader for parcel deliveries – coincides with two separate reviews as to why so many foreign companies still prefer Switzerland.

The first “Location Management Forum”, which organisers hope to turn into a regular event, took place at St Gallen University on Wednesday.

And the “Global Headquarters Benchmarking Study”, by consultants Arthur D. Little, confirms that Switzerland remains the number one choice for multinationals setting up European or international headquarters.

Speakers at the St Gallen event included Stefan Held, head of the German branch of consulting company KPMG, Eric Scheidegger, director of locational promotion at the Swiss economics ministry, and Ueli Forster, president of the Swiss Business Federation, economiesuisse.

Gut feelings

Economiesuisse published a report last week warning that Switzerland risked losing its competitive edge when it came to corporate tax rates – traditionally the number one factor affecting international location decisions.

While few countries are likely to match the rock-bottom rates in canton Zug, corporate taxes have fallen across Europe in recent years, and the downward trend has been accelerated by the entry of new members to the European Union.

However, Held told participants at the St Gallen conference that tax rates were “an important factor, but not the only one” when it came to choosing international locations.

He said many executives ended up making such decisions based largely on “gut feelings”.

Scheidegger stressed the importance of the federal system in Switzerland, which allows individual cantons to compete against each other for direct investment.

He downplayed the role of the federal authorities in attracting foreign firms, but said inter-canton competition should not reach a stage where the country as a whole might lose out.

Several French-speaking cantons are in the process of joining forces in pursuit of foreign investors, with canton Jura due to join Vaud, Neuchâtel and Valais in the Development Economic Western Switzerland (DEWS) grouping.

White-collar bliss

Meanwhile, the Arthur D Little report concludes that the ongoing trend to relocate and reorganise the headquarters of international companies will continue – largely because cost-cutting pressures will not stop.

“[Since the 1950s], the country in Europe proving to be the preferred destination for headquarters is Switzerland,” said the report’s co-author Herbert Wanner, an associate director at the consulting company’s Zurich office.

“The reasons are manifold and simple: Switzerland has low taxes, excellent managers and is an attractive place to live for white-collar workers.”

Other “draw” factors include political stability, a steady currency, a central geographical position, good transport links, proximity to technology and research centres, and a strong financial-services sector.

On the negative side, respondents saw “room for improvement” in several areas, including work permits, international flight connections, lack of international schools, different legislation to the European Union and administrative labour costs.

The list of United States companies already present in Switzerland reads like an excerpt from the Fortune 500 listings: Philip Morris, Du Pont de Nemours, eBay, Caterpillar, General Motors, Proctor & Gamble, Dow Chemical, Oracle and Cisco, to name just a few.

However, Switzerland is also attracting companies from European countries: Kühne & Nagel, Liebherr International, Metro Holding, Eurotax, Dynamit/Nobel and SAP.

Focused approach

In many cases, key individual functions such as marketing, finance or human resources have been relocated to Switzerland.

Caterpillar, Argonaut and Eastman Chemicals have moved their marketing departments here, while eBay, Alcoa, Elopak, Omnexus and Baxter relocated financial functions.

“In the case of Switzerland, the trend not to relocate complete headquarters but to make optimum use of the preferred qualities could result in a functional specialisation of the country as a location for [key] functions,” added Wanner.

“[In particular], the further development of Switzerland as a centre for banking will probably heavily influence the number of transfers in the future.”

And international companies are not the only ones taking a more “focused” approach.

The Swiss economic-promotion authorities are also shifting to a more targeted marketing strategy that goes beyond simply attracting more multinationals. They are looking towards micro-marketing, including specific sectors – and even types of individual.

After all, it is not only rich companies that have traditionally seen the advantages of living in Switzerland.

A host of equally famous individuals ranging from David Bowie and Tina Turner to Michael Schumacher and Boris Becker have also been lured by the low taxes and excellent financial centres within easy driving distance of the ski slopes.

swissinfo, Chris Lewis

Key facts

The top five factors in locational decisions are:
corporate tax advantages (88%)
qualified managers (72%)
quality of life (69%)
central location (62%)
support of authorities (55%)

In brief

UPS says its decision to come to Biel in northwestern Switzerland will create 100 new jobs and generate around SFr30 million ($26.3 million) in capital investment.

Two organisations – St Gallen University and consultants Arthur D. Little – have taken a look at what makes the country so attractive.