Successfully investing in Switzerland

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published on May 16, 2018

  

How do you assess the current economic situation in Switzerland?

In 2017, Switzerland – a country with a population of nearly 8.5 million – achieved a per capita GDP of USD 66,000, adjusted for purchasing power (Germany: 45,000 / USA: 52,000).  In 2017, Switzerland's GDP grew by 1 % on the previous year. (Euro Area 2.3 %). The industry and the service sector contributed to this growth practically in equal measure. Other sectors that significantly contributed to this development were the financial services sector, transport and communication, state administration, health care and hospitality, which strongly benefited from the devaluation of the Swiss franc.

 

Particularly positive growth was observed in foreign trade in goods, which achieved an all-time high in 2017.  The increase was much steeper in exports (CHF 237 billion) than in imports (CHF 203 billion); therefore, the trade surplus jumped from over CHF 5 billion to a record high CHF 34 billion. As usual, the increase is almost entirely attributable to the chemical and pharmaceutical products in the case of which Switzerland generated a surplus of over CHF 70 billion – twice as much since 2009. By contrast, after several years of strong increases, foreign trade in services has moved into a consolidation phase.

 

Nonetheless, the favourable global economic environment continues to provide impetus to the Swiss economy. Given the increasingly powerful upturn, the Swiss expert group expects that the Swiss economy will be developing favourably also in the coming quarters. For 2018, strong GDP growth of 2.4% is expected. In the second half of the forecast horizon, the pace of growth is expected to gradually decelerate in the big economic regions and thus also in Switzerland. For 2019, the expert group expects further solid GDP growth of 2.0%.

 

Since mid 2016, the unemployment rate has been declining – and more and more rapidly at that. At the end of February, the total number of the registered unemployed (adjusted for seasonal and one-time factors) was nearly 195,800. The job seekers ratio was thus 4.4% and the unemployment rate 2.9%.
 

How would you describe the investment climate in Switzerland?  Which sectors offer the largest potential?

In macroeconomic terms, the Swiss currency shock is over, and overall, the economic situation is as good as it hasn't been since unpegging the franc from the euro in January 2015. Investment activity has significantly increased over the last 2 years and there are no indications that this upward trend might reverse. According to the latest company surveys, intensive investment activity is to be expected in the near future, especially that companies are showing an increased need for expansion investments. The common sentiment indicators suggest that the upward trend will continue this year.

 

This low-resource country is perfectly positioned to face the challenges arising from digitisation. The Internet of Things enables introducing new products, services and business models, which will be increasingly in use – an opportunity for Switzerland as a location whose potential is not impaired by any unnecessary regulations. Also the pharmaceutical industry, the chemical industry, the health care and the social insurance systems as well as engineering have enormous potential, while the watch industry and financial services will need to struggle with difficulties.
 

What challenges do German companies face during their business ventures into Switzerland?

The biggest challenge is the recruitment of qualified and reputed specialists. In addition, after Swiss society said no to the corporate tax reform III, the tax framework conditions and the immigration regulation, which was still not settled as of May 2018, raise uncertainties whose final outcome is now difficult to assess. Given the economic, political and social stability, these challenges, however, should not discourage investors from venturing into Switzerland.

What tips would you have for a German company venturing to Switzerland?

The federal structure of Switzerland, which is characteristic for this country, can facilitate business progress if it is taken into account by transferring responsibility to smaller structures. 

Switzerland is one of the most prosperous countries in the world. What advantages and disadvantages arise from this fact to foreign investors?

The disadvantage of prosperity is reflected in the higher costs of labour compared to other countries, which on the other hand compels companies to balance this disadvantage out with better quality and increased efficiency. The success of doing this balancing act is reflected in the value of the "Swiss made" quality label.

In your opinion, how will Switzerland develop?

Switzerland's attractiveness as a business and education location will continue to increase and the country will maintain its position as the "Innovation World Champion" thanks to technological progress. This will ensure the country's growth potential and will strengthen the Swiss franc further in the long term as a safe haven currency. Aided by its business-friendly policies, Switzerland will thus remain a destination of choice for foreign investors.

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Sebastian Repetz

Country Manager Switzerland at Rödl & Partner

+41 44 749 55 45

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Jörg Wiederkehr

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+41 44 749 55 17

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