Home News Decline in new orders due to strong Swiss franc
Contact Person  Ivo Zimmermann Ivo Zimmermann
Head of Unit
+41 44 384 48 50 +41 44 384 48 50 i.zimmermannnoSpam@swissmem.ch

Decline in new orders due to strong Swiss franc

The situation in the Swiss mechanical and electrical engineering industries (MEM industries) is continuing to worsen due to the strong Swiss franc. Pressure on export prices has risen further, squeezing companies’ margins yet again. In the second quarter of 2011, the growth trend in new orders was interrupted for the first time in fifteen months. The worldwide economy is also beginning to slow down. The only thing that would help the MEM industries in the short term is a considerable depreciation of the Swiss franc. Swissmem welcomes the measures taken by the Swiss National Bank, as well as the Federal Council's approach.

The negative impact of the Swiss franc's massive overvaluation is reflected in the statistics. Following five quarters in which new orders rose, the number began falling again in the MEM industries in the second quarter of 2011, decreasing by 2.6% year on year. Between January and March 2011, new orders had risen by 27.3%. Overall, new orders rose by 11.6% in the first half of the year.

As anticipated, sales rose in the first half due to good levels of orders. At +3.7% though, the increase was modest. The reason for this is the pressure on export prices, which has been growing for months now. In the second quarter alone, prices fell by an average of 4.9%. Export prices have now been declining for ten quarters in a row. Pressure on companies' margins has continually tightened during this period. The ever-worsening scenario in the MEM industries is also reflected in corporate guidance. In the first quarter, a mere 13.9% of companies surveyed had a pessimistic outlook for the following 12 months, but this figure doubled in the second quarter to 27.8%.

The current figures for the MEM industries, the much bleaker sentiment among companies and the worldwide economic slowdown point to a difficult few months ahead for this sector.
Swissmem welcomes the SNB's and Federal Council's measures
The only thing that would help the MEM industries in the short term is a considerable depreciation of the Swiss franc. If this does not happen, many companies will have far-reaching decisions to make this autumn. After all, much of Switzerland's industrial substance is under threat. Swissmem thus entirely welcomes the approach taken by the Swiss National Bank (SNB) to weaken the Swiss franc. Swissmem expects the SNB to firmly pursue the path it has embarked upon, stepping up its measures if necessary.

In Swissmem's view, such an extraordinary situation also justifies taking specific, one-off emergency measures that will be applicable for a limited period only. The purpose of these measures is to ease the pressure on companies whose existence would be acutely threatened by the strength of the Swiss franc. Swissmem expects the Federal Council task force to devote part of the aid package to short-term emergency measures of this kind.

The operating environment for the industry must also be improved. In the short term, this will not help tackle the strength of the Swiss franc. However, it will help make Switzerland a more attractive centre of industry in the medium and long term. Swissmem therefore welcomes the Federal Council's approach and, in particular, supports its intention to consistently promote innovation, take action to prevent Switzerland from becoming an "island of high prices" and to reduce the burden of fiscal charges and red tape.

In addition, Swissmem is calling on importers to pass on their currency gains to trade, industry and consumers in full.

No restrictions on the free movement of persons

To compensate for lower margins, Swiss industry has to be a source of excellent innovation. This is only possible with qualified employees, which are increasingly lacking in Switzerland. The Swiss labour market cannot meet this demand. The agreement on the free movement of persons with the EU is therefore vital to industry, as it gives Swiss companies access to the European labour market and thus to the specialists it needs.

The latest survey among Swissmem's member companies underlines the acute lack of specialist employees:

  • 69% of MEM companies who responded stated that they are lacking specialist staff, with 78% of companies with more than 250 employees confirming that this is the case.

  • 60% of companies agree that the lack of specialists is damaging their ability to compete on the market, with this figure rising to 67% for larger companies.

The results of the survey show that companies in the MEM industries are in particular looking for highly qualified employees from the EU. More than two thirds of companies surveyed recruit people from the European labour market with a university degree or a good professional training qualification.

The political attacks on the free movement of persons that were recently launched therefore present a threat to the competitiveness of Swiss industry. Swissmem thus rejects the initiative of the SVP (Swiss People's Party) to stop "mass immigration".

Zurich, 24 August 2011

For further information, please contact:
Ivo Zimmermann, Head of Communications
E-mail: i.zimmermannnoSpam@swissmem.ch

Tel.: +41 (0)44 384 48 50 / mobile: +41 (0)79 580 04 84