Corona Pan­demic: a re­cent sur­vey shows the deep wor­ries of Swiss busi­ness

The cur­rent sur­vey among mem­bers of economiesu­isse shows that the emer­gency mea­sures pre­sented on 26 March 2020 by the Swiss gov­ern­ment with the aim to pro­vide ad­di­tional liq­uid­ity for com­pa­nies are to the point and ap­pro­pri­ate. Swiss busi­ness is ex­pect­ing a mas­sive in­crease of com­pa­nies with liq­uid­ity prob­lems. Al­ready today, one third of the com­pa­nies have dif­fi­cul­ties to en­sure liq­uid­ity for their op­er­a­tions and this num­ber is ex­pected to rise to 50 per cent in the com­ing two months. Thus, the safe­guard mea­sures of the fed­eral gov­ern­ment are com­ing at the right time in order to break the neg­a­tive chain re­ac­tion in the econ­omy. How­ever, dwin­dling sales are not the only rea­son for ris­ing liq­uid­ity prob­lems. Many com­pa­nies re­port that pay­ment be­hav­iour be­tween busi­nesses has dras­ti­cally de­te­ri­o­rated. They there­fore fore­see a sig­nif­i­cant in­crease of bad debt losses which in turn im­pacts their liq­uid­ity neg­a­tively. Ad­di­tion­ally, the sur­vey has brought up fur­ther in­ter­est­ing but also dis­turb­ing facts:

• Al­ready today, many com­pa­nies face prob­lems sell­ing their prod­ucts and ser­vices in Switzer­land. Over the next two months, the drop in sales in com­par­i­son with the pe­riod be­fore the corona cri­sis is ex­pected to con­tinue at the same low level but should not de­crease fur­ther. Sub­con­trac­tors and sup­pli­ers to the cater­ing in­dus­try, ho­tels, event or­gan­is­ers, hair­dress­ing sa­lons etc. are heav­ily af­fected by the gov­ern­men­tal clos­ing bans. The tex­tile in­dus­try can no longer sell a large part of the cur­rent col­lec­tion. The same prob­lem ap­plies to other sup­pli­ers to the re­tail trade. The au­to­mo­bile trade is being hit by the pro­duc­tion stop in Eu­rope.
• Over the com­ing two months, the pro­por­tion of com­pa­nies fac­ing sales dif­fi­cul­ties abroad is ex­pected rise from less than one third to over a third.
• Com­pa­nies are equally ex­pect­ing dif­fi­cul­ties in the pur­chas­ing of pre­lim­i­nary goods. Com­pa­nies are specif­i­cally re­port­ing sup­ply short­ages for the fol­low­ing prod­ucts: flavours, vi­t­a­mins, pack­ag­ing ma­te­r­ial, build­ing ma­te­r­ial, al­co­hol, glyc­er­ine, med­ical de­vices, rare earths, mag­nets.
• These sup­ply bot­tle­necks af­fect goods from many coun­tries. As in re­cent weeks, there are still de­lays in the de­liv­ery of prod­ucts from Asia (China, Japan, South Korea, Thai­land, India). In­creas­ingly, how­ever, there are also sup­ply bot­tle­necks for im­ports from Eu­rope, es­pe­cially from Italy, but also from Poland, Ser­bia, Turkey, Aus­tria, France and Ger­many. And fi­nally, also Swiss sup­pli­ers are some­times falling be­hind sched­ule.  The ex­port in­dus­try is par­tic­u­larly af­fected: it is ex­pected that over the com­ing two months, up to 85 per­cent of all ex­port com­pa­nies will be af­fected by sup­ply bot­tle­necks in one form or an­other.
• A prob­lem which has been over­looked so far con­cerns the phar­ma­ceu­ti­cal and biotech­nol­ogy in­dus­tries. Due to the in­creased bur­den on hos­pi­tals, clin­i­cal stud­ies are cur­rently hardly fea­si­ble. This slows down the de­vel­op­ment of new drugs con­sid­er­ably. This is par­tic­u­larly prob­lem­atic for fu­ture-proof start-ups that do not yet gen­er­ate sales.
• Both the pro­por­tion of com­pa­nies that are cut­ting jobs and those that are cre­at­ing jobs will in­crease. How­ever, 56 per­cent of the com­pa­nies ex­pect to have too many em­ploy­ees in the next two months. In con­trast, ten per­cent of the com­pa­nies ex­pect a short­age of staff. Ac­cord­ingly, al­most two thirds of the com­pa­nies do not rule out re­sort­ing at least par­tially to short-time work. Lay-offs in the next two months are con­sid­ered by 30 per­cent of the com­pa­nies. What is now in de­mand are peo­ple who can change jobs at short no­tice or help in other sec­tors where there are staff short­ages. Both, the do­mes­tic econ­omy and the ex­port sec­tor will be equally af­fected by the job cuts.
• The con­tain­ment of the corona pan­demic is caus­ing great eco­nomic dam­age. On av­er­age, com­pa­nies re­port that their turnover has fallen by a fifth due to the cri­sis. It is also ex­pected that within the next two months, sales will de­crease by one third in av­er­age.

Sup­port from the fed­eral gov­ern­ment is re­ceived pos­i­tively and is gen­er­ally con­sid­ered enough.

Are the Fed­eral Coun­cil's mea­sures now enough to ad­dress the acute and major prob­lems in the Swiss econ­omy? The re­ac­tion to the Fed­eral Coun­cil media con­fer­ence from 20 March 2020, at which a new aid pack­age worth an ad­di­tional CHF 32 bil­lion was an­nounced, is re­veal­ing. As the sur­vey was launched shortly be­fore this, about two-third of the mem­bers took a stand with­out know­ing about the new sup­port mea­sures. In a first phase, the gov­ern­ment made only CHF 10 bil­lion avail­able. The later par­tic­i­pants in the sur­vey made their as­sess­ment in the knowl­edge that the fed­eral gov­ern­ment had mas­sively in­creased its aid. There are sig­nif­i­cant dif­fer­ences be­tween the two groups: about half of the com­pa­nies de­scribed the mea­sures of the first aid pack­age of the fed­eral gov­ern­ment as enough. Fol­low­ing the an­nounce­ment of the sec­ond pack­age, this pro­por­tion rose to over three quar­ters. The over­whelm­ing ma­jor­ity of com­pa­nies are there­fore of the opin­ion that the new mea­sures of the Fed­eral Coun­cil are now enough to con­tain the eco­nomic dam­age.

How­ever, Swiss busi­ness does not ex­pect the cri­sis to end soon. Com­pa­nies es­ti­mate that their eco­nomic sit­u­a­tion will not re­turn to nor­mal for at least six months. The de­ci­sive fac­tor in the cur­rent as­sess­ment is that there will be no far-reach­ing shut­down. Oth­er­wise, the neg­a­tive de­vel­op­ments would be in­ten­si­fied. Com­pa­nies there­fore ask gov­ern­ment to keep in­dus­trial pro­duc­tion run­ning.

Push for dig­i­ti­za­tion processes

Fi­nally, the com­pa­nies were asked whether they had any pos­i­tive news to re­port. They often men­tioned that the cri­sis had a pos­i­tive im­pact on com­pa­nies' digi­ti­sa­tion ef­forts. In ad­di­tion to process im­prove­ments, it was often men­tioned that the cri­sis had made home of­fice more ac­cept­able. Oc­ca­sion­ally, the sit­u­a­tion is prof­itable for those com­pa­nies that can fill in for for­eign sup­pli­ers who are un­able to de­liver. And some com­pa­nies as­sume that the sup­ply chain will be re­viewed after the cri­sis and re­dun­dan­cies will be built in so that they are not de­pen­dent on in­di­vid­ual sup­pli­ers.

In­for­ma­tion about the sur­vey

The sur­vey was sent to all mem­bers of economiesu­isse on Thurs­day morn­ing, 19 March, and lasted until Tues­day, 23 March 2020. 84 mem­bers took part. The sur­vey cov­ered all parts of Switzer­land. Some in­dus­try as­so­ci­a­tions have com­pleted the sur­vey in a con­sol­i­dated form for their in­dus­try. The eval­u­a­tion shows the cur­rent mood among Swiss busi­ness. If per­cent­ages are given, these should only be taken as an es­ti­mate. The an­swers were not weighted in each case.