National economy Profitability is dwindling at Swiss industrial companies

Swiss industry continues to benefit from its reputation as a producer of high quality. At the same time, however, it is facing growing challenges.

This is shown by the "Swiss Manufacturing Survey 2024" study published on Thursday by the Institute of Technology Management at the University of St.Gallen (ITEM-HSG). It is striking that 42% of companies expanded their production capacities in Switzerland last year, while only 9% recorded a reduction in capacity.

Despite high labor costs and the strong Swiss franc, Switzerland remains an attractive production location, according to the study. And the "Made in Switzerland" label continues to play a key role as a quality feature in international competition.

Financial situation deteriorates

However, the financial situation of Swiss industrial companies has deteriorated compared to previous years. The proportion of companies with an EBIT margin of over 10% has fallen by 11% compared to 2021. SMEs in particular are facing challenges in international business, which is leading to an increase in negative EBIT margins.

While larger companies achieve more stable margins both at home and abroad, international business remains a challenge for many SMEs, accompanied by rising costs and increasing competition.

Despite these financial burdens, companies are making progress in the areas of sustainability, digitalization and innovation. According to the survey, 22% of turnover is now generated with innovative products and services in these areas. Larger companies in particular are driving the transformation towards more sustainable production processes.

The challenge of a shortage of skilled workers

However, according to the study, the shortage of skilled workers remains a major challenge. 76% of companies are affected by this, which is reflected in rising wage and recruitment costs as well as longer vacancy periods.

Another challenge is the impact of geopolitical uncertainties, particularly on supply chains. Around 73% of companies expect geopolitical turbulence to have a major impact over the next five years. The uncertainties in international trade, particularly with regard to Europe and Asia, are forcing many companies to diversify their supply chains and give preference to local suppliers.

Reliable partners

Europe remains the most important export market for Swiss industry, followed by Asia and North America. Product quality and delivery reliability are the key unique selling points that make Swiss companies strong in global competition. This is particularly advantageous in markets such as Germany, where Swiss companies are regarded as reliable partners.

Another topic of the survey is the trend towards servitization. More and more companies are undergoing a transformation process from pure product providers to providers of comprehensive solutions and services. However, the study shows that this change is still in its infancy. SMEs in particular are finding it difficult to take this step consistently, while larger companies with more extensive resources and a global presence are making faster progress.

361 representatives from 339 different companies took part in the survey, representing a total of 1,200 production sites in 64 countries.

SDA