Swiss companies maintain financial stability amid European struggles

Despite their relative resilience, Swiss companies have seen a noticeable increase in restructuring activities. Keystone / Patrick Huerlimann

Swiss companies continue to demonstrate financial robustness compared to their European counterparts, although corporate restructuring activities have increased in recent months.

In 2023, the number of Swiss companies in financial distress decreased from 6.1% to 5.2%, according to a study released by auditing firm Alvarez & Marsal (A&M) on Monday. This category includes companies facing existential financial difficulties and requiring restructuring.

European companies face greater challenges

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European companies are in a far worse position, with nearly one in ten in financial distress. In 2023, the financial situation deteriorated in 10 out of 16 sectors across Europe. Additionally, almost one-third of European companies are in a weak financial position, a record figure driven by increased financial debt, low turnover, declining consumer spending, and inflation-related expenditures.

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A&M experts predict that financial distress in Europe will continue to rise in 2024 due to persistent high interest rates and slow inflation reduction.

Increased restructuring needs in Switzerland

Despite their relative resilience, Swiss companies have seen a noticeable increase in restructuring activities. The weak European economy negatively impacts Swiss export companies, and weak domestic economic spending also poses challenges.

“For 2024, we note that the delayed negative effects of the pandemic, exacerbated by the rise in interest rates since 2022, are also weighing on the profits and balance sheets of Swiss companies and leading to considerable restructuring activity,” said Alessandro Farsaci, Managing Director Switzerland at A&M. However, falling interest rates and stable inflation are expected to create more favourable conditions in the future.

Sectors under stress

Hospitals are particularly affected, with around one in ten facing refinancing difficulties, the highest percentage among all sectors. Contributing factors include outdated tariffs, inflation, rising energy costs, and significant investment requirements.

The construction and chemical sectors also show increased stress. Construction companies face a negative trend, while the chemical sector grapples with high energy prices, growing competition from China, and the need for decarbonization.

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Study scope The A&M study analyzed the earnings and financial situation of over 8,200 companies in Europe and the Middle East, including 212 companies from Switzerland. The study focused on companies with a turnover exceeding €20 million (CHF19 million). Financial distress is defined as a combination of a weak balance sheet and inadequate company performance.

Adapted from German by DeepL/amva

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