Bankruptcies are on the rise Why are so many traditional Swiss companies dying out?

Traditional Swiss companies and SMEs are increasingly running into financial difficulties. In the first half of 2024, there was a significant increase in insolvencies - the automotive and real estate sectors are particularly affected. One expert assesses the situation.

It seems that traditional companies and SMEs in Switzerland are going bankrupt more and more frequently. This is confirmed by figures and experts. But why are so many companies going out of business?

The federal government and Seco's SME portal provide information on the insolvency figures for companies in Switzerland in the first half of 2024. The number of insolvency proceedings in Switzerland is not slowing down. In the first half of 2024, 3006 companies went out of business, according to economic consultancy Dun & Bradstreet, writes the SME portal. This represents an increase of 7 percent compared to the previous year.

Automotive and real estate sectors suffer the most

Central Switzerland (384, +27 percent), Eastern Switzerland (336, +12 percent) and the canton of Zurich (552, +10 percent) saw a particularly high increase in deletions from the commercial register.

For their part, the Lake Geneva region and Northwestern Switzerland recorded a more moderate increase in bankruptcies of 7 percent (694 and 397 cases respectively). In Ticino, the situation has changed only slightly (179, +2 percent), while Espace Mittelland is the only region where insolvency proceedings declined (464, -11 percent).

In the first half of 2024, companies in the automotive industry (+43 percent) and the real estate sector (+38 percent) were heavily affected by insolvencies. Manufacturing and personal services also recorded an increase in bankruptcies of 16% each.

As is so often the case, there is not just one reason for the demise of traditional companies. SME expert and economist Felix Horlacher says: "There are sectors that are having a harder time today than in the past. Another factor is digitalization." There are usually various factors that bring a company to its knees. Horlacher constantly monitors the sectors and confirms that there has been a slight increase in closures. However, new companies have also been founded.

"The reasons can vary depending on the sector or industry. In the export business, for example, the exchange rate is a factor that can harm a company," says Horlacher. Digitalization is an important factor that can make the difference between bankruptcy or rising figures.

Companies that invest in digitalization early on can save costs and reduce prices in the service sector. "This makes a company more attractive to customers," says Horlacher. For example, internal processes can be simplified through digitalization. Digitalization is also important for customers. For example, digital receipts or guarantees can save paper, and competition between companies should not be underestimated.

The war in Ukraine may be responsible for the extinction

Another reason could be the war in Ukraine and the Middle East. "The Swiss economy is mainly affected by the wars in terms of energy prices. They have now leveled off again. But this will certainly cost certain companies a lot of money," says Horlacher. If you imagine a steelworks, higher electricity or energy costs can quickly spell the end of a company.

Horlacher believes that the industrial sector is more affected by closures than the service sector.

Another reason is competition. Certain sectors have to consider whether they need to rethink their strategy or even the direction of their business. "A Swiss company that manufactures textiles, for example, has no chance of competing with the big companies," explains Horlacher. The big textile companies produce in Asia. The market is exhausted and production in Asia is significantly cheaper. "So a Swiss textile company can't compete at all," says Horlacher.

For the expert, however, a closure does not necessarily mean something negative. "If a company closes but the industry is working at full capacity, it doesn't necessarily have to harm the economy." There is a natural mixing of the workforce and other companies could possibly receive a new boost. It may be a little cynical, but competition is fierce and this is the only way that other companies in the same sector might even get a new boost.