Home News MEM industries: Decline in sales and huge loss of margin expected
Contact Person  Ivo Zimmermann Ivo Zimmermann
Head of Unit
+41 44 384 48 50 +41 44 384 48 50 i.zimmermannnoSpam@swissmem.ch

MEM industries: Decline in sales and huge loss of margin expected

Business in Switzerland's mechanical and electrical engineering industries (MEM industries) stagnated in the second half of 2014 due to the weak economic situation in the MEM industries' main market of Europe. This, coupled with the sudden massive appreciation of the Swiss franc and uncertainty over the future of the Bilateral Agreements, has resulted in a perceptible decline in Switzerland's attractiveness as a location for industry. Companies have downgraded their business expectations for the twelve months ahead accordingly, and pressure on margins has once again risen dramatically. Nevertheless, firms will do everything in their power to regain their competitiveness. Swissmem is also urging the government and social partners to do their utmost to support member companies' efforts and make Switzerland a more attractive place to do business.

New orders received by the Swiss mechanical and electrical engineering industries (MEM industries) in 2014 increased by 4.9 percent year-on-year. This increase is due entirely to the first six months of the year. Orders stagnated during the third quarter and fell by 1.8 percent in the fourth quarter compared with the same period last year. The picture for sales development is similar. While sales for the year as a whole rose slightly by 0.3 percent, sales in the third and fourth quarters fell by 4.2 and 2.4 percent respectively on a year over year basis. At an average of 88.2 percent, capacity utilization in the MEM industries was above the long-term mean of 86.1 percent. It peaked in the fourth quarter at 88.8 percent.

Moderate export growth 

In 2014, the MEM industries exported goods with a value of CHF 66.2 billion, which corresponds to 1.3 percent growth compared with the same period a year ago. With the exception of electrical engineering/electronics (-4.4%), goods exports rose year-on-year in all product areas. Exports of metals benefited most (+3.2%), followed by mechanical engineering (+2.3%) and precision instrument exports (+0.2%). The USA is currently the MEM industries' most dynamic sales market. Fourth-quarter exports to this market rose by 21.5 percent year-on-year, while the increase for the year as a whole was 7.8 percent. Exports to Asia also picked up by 6.1%. The fourth-quarter increase amounted to 6.4 percent. In contrast, exports to the EU stagnated during 2014 (rate of change for 2014: 0.0%; fourth-quarter change +1.0%). 

Dwindling margins

Business trends in the MEM industries for the second half of 2014 make it clear that stagnation would have set in even if the minimum Swiss franc-euro exchange rate had not been abandoned. However, the SNB's decision of 15 January 2015 has caused margins to contract – in some cases massively. Many industrial SMEs have fallen back into the red. With the aid of a reliable minimum exchange rate and a major "fitness drive", companies had succeeded in regaining their international competitiveness since 2011. A large number of efficiency enhancement measures were implemented. While companies' efforts over recent years have not been in vain, their positive effects have been wiped out following the SNB's decision. The fight to restore competitiveness – and in some cases to stay in business – is starting afresh. 

This new, sudden appreciation of the Swiss franc is having a corresponding dampening effect on the mood at companies in the MEM industries. In the latest survey of member companies' business expectations for the coming twelve months, held in January 2015, 48.6 percent of respondents said they were expecting fewer orders from abroad. This shows that pessimism has more than trebled since the autumn 2014 survey. The strong Swiss franc, weak economic situation in the main European market, uncertainty over the future of the Bilateral Agreements and a lack of skilled labour have resulted in a perceptible decline in Switzerland's attractiveness as a location for industry. This is impacting on investment decisions and could leave visible marks on the job market. 

Political rethink essential

"Our member companies will do everything they can to absorb this further shock appreciation in the Swiss franc," said Swissmem President Hans Hess. "We are urging the government and our social partners to do their utmost to support companies in their fight to stay competitive and make Switzerland an attractive place to do business again." The following points are key from Swissmem's perspective: 

  1. The anti-immigration initiative has to be implemented in such a way that the Bilateral Agreements are upheld and discrimination-free access to Swissmem member companies' most important sales market is assured.
  2. Swissmem is urging the Federal Council to work towards a free trade agreement with the United States, the MEM industries' second most important market, accounting for 11.3 percent of exports. The Federal Council should at least try to take part in the negotiations between the EU and the United States.    
  3. It is important for companies to be able to use the existing leeway afforded by the MEM industries' collective labour agreement. The blocking attempts of certain trade unions are having the sole effect of damaging Switzerland’s appeal as a business location. In return, companies are having to structure the necessary measures in the most socially responsible way possible.
  4. Swissmem expects the Swiss government to explore measures to further promote innovation. The 2011 CTI programme produced positive results across the board. However, any new programme would have to primarily satisfy the needs of member companies, run for a longer period and be less bureaucratically organized.
  5. Politicians have done too little in recent years to increase Switzerland's appeal as a centre of industry and to reduce the obstacles and restrictions facing companies. Swissmem is demanding that the government create a framework to make Switzerland more attractive again and restore companies' confidence that they can continue to operate in the country and remain competitive in the long term.

For further information, please contact:

Ivo Zimmermann, Head of Communications 

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

E-mail: i.zimmermannnoSpam@swissmem.ch

Philippe Cordonier, Communications Manager, French-speaking Switzerland

Phone: +41 (0)21 613 35 85

Mobile: +41 (0)79 644 46 77

E-mail: p.cordoniernoSpam@swissmem.ch