Economic outlook: Swiss economy must dress warmer

Economic sentiment among Swiss CFOs is clouding over for the first time in more than three years. This is one of the key findings of the CFO survey conducted by Deloitte every six months since 2009. A total of 109 CFOs from both listed companies and privately held companies took part in the current survey, which was conducted between August 29 and September 24, 2018.

The big boom is over

Still 77% of the more than 100 CFOs surveyed in this country are positive about the economic outlook. This represents a decline of 8 percentage points compared with the first half of 2018. Caution is called for. After the last three similar shifts in sentiment, things went steeply downhill twice, the study shows. The fact that the growth peak seems to have passed can also be seen in the fact that CFOs' optimism about their own company's financial prospects has shrunk significantly over the past three months. The net balance (optimistic minus pessimistic mentions) has fallen from 24% to a low but still positive 9%. "The Swiss economy is still robust, but the big boom is over. The ongoing international trade disputes are also rubbing off on Switzerland for the first time. The protectionist posturing emanating in particular from the two major powers, the USA and China, is fueling uncertainty among our export-oriented companies," comments Michael Grampp, Chief Economist at Deloitte Switzerland, on the results of the CFO survey.

Trading partners increasingly signal unreliability

Overall, only 40% of CFOs assess the level of economic and financial uncertainties in this country as high. This result may be regarded as optimistic. However, developments abroad are responsible for the CFOs' uncertainty. Just under half of export-oriented Swiss companies (48%) see major uncertainties ahead. The economic outlook is clouded above all by increasing political uncertainties among traditional trading partners. Compared to the first half of the year, risk perceptions against established partners the US (up 26% to 77%), Italy (up 20% to 64%) and China (up 15% to 30%) are rising dramatically in the current half-year. Unsurprisingly, the Brexit-plagued UK is also rated as a risky trading partner by a high 64% of CFOs. Relations with the two traditionally most important partners, Germany (11%) and France (7%), are viewed more positively. For both, the level of uncertainty has decreased compared with the first half of the year. However: Many Swiss companies currently have other priorities. "Geopolitical uncertainties and protectionism are very relevant in the risk perception of Swiss CFOs, but top of the list are internal company processes. Potential homegrown problems are the top risk for the first time. Many companies are currently very preoccupied with themselves and are not focusing with full vigor on external challenges. This is exactly what is needed," says Alessandro Miolo, Partner CFO Program Manager at Deloitte, analyzing the field of tension in which CFOs are currently operating.

EUR/CHF exchange rate: 1.07 as pain threshold

In view of the challenging international business, the CHF/EUR exchange rate is a particular focus for Swiss companies. For just under 60 percent of the CFOs surveyed, a stronger franc would have a direct negative impact on their company. As an average, the CFOs surveyed cite a EUR/CHF exchange rate of 1.07 as the pain threshold.
Alessandro Miolo classifies this result as follows: "After the abolition of the minimum exchange rate in January 2015 and the initial shock, companies have come to terms with the exchange rate situation. But the CHF/EUR exchange rate now hangs over companies like a sword of Damocles. It is surprising that only slightly more than half of Swiss CFOs limit the exchange rate risk by means of risk assessments or financial hedging. There is no room for inaction on this issue."

Skills shortage keeps companies on their toes

Despite declining trends in the positive outlook, companies across Europe remain eager to spend, both in terms of investments and hiring. 39% of Swiss CFOs still expect investment to increase in the 12-month outlook. This is broadly in line with the impression also given by the ORGANISATOR survey "SME Monitor has shown. In terms of investment propensity, Switzerland is on a par with the European average, according to Deloitte.

42% of Swiss CFOs are confident that they will increase the number of employees in the next 12 months. However, they see access to qualified personnel as a growing risk. Almost without exception, they share these concerns with CFOs in other European countries. Among our neighbors Germany and Austria, the shortage of skilled staff is even the most frequently cited risk. Even against the backdrop of Switzerland's priority for Swiss nationals, it is quite possible that the "war for talent" will continue to increase within the German-speaking countries. People with appropriate technical knowledge and professional experience are particularly sought after.

Switzerland relies more heavily than the European average on foreign recruitment (33%) and not quite as frequently on the activation of alternative groups of workers (e.g. reentrants or older workers, 20%). The national priority, which has been in force since July 2018, therefore does not seem to show any effect in this study, especially since the occupational profiles subject to reporting for the national priority are for the most part not highly qualified professionals.

Source and further information: Deloitte

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