Why are international companies starting to snub Switzerland?
A new study by consulting firm BearingPoint has revealed that while Switzerland remains a hub for international companies, it has failed to attract more entrepreneurs than other European nations. Experts told Watson that the country’s relative decline can be blamed on a number of factors, from skills shortages to demographic changes and the alpine nation’s relationship with the European Union.
Switzerland relies heavily on international companies
In all, the study found that despite only making up 5 percent of all companies registered in Switzerland, multinational firms provide jobs to 26 percent of the country's workforce. They also contribute around 36 percent of total gross domestic product and provide the federal government with half the business wealth taxes it receives every year.
Watson noted that most multinational companies choose to headquarter in Switzerland, rather than base their industrial or logistics operations in Swiss cities and cantons. For example, RBI, the firm that owns Burger King, has its European headquarters in Zug, while every time Alphabet (Google) makes a profit, they are able to send more people to their offices in Zurich - the company's largest location outside the US.
Switzerland falling behind competitors in attracting new firms
However, BearingPoint found that, in recent years, Switzerland has only attracted the fourth largest number of new multinational companies in Europe, behind the Netherlands, Luxembourg and the United Kingdom. While the total number of new firms has been rising, Switzerland’s percentage share of multinationals has been declining for years.
Some of Switzerland’s near misses when it comes to attracting new firms include when outdoor outfitter Black Diamond chose to base itself in Austria, and when the country was snubbed by Apple, which went on to build its European chip design centre in Munich instead.
Why do companies find it hard to move to Switzerland?
In the study, the authors blamed a number of factors for Switzerland’s relative decline. First, they noted that the skills shortage remains a huge problem for firms wanting to relocate, as the country suffers from a lack of both specialist and regular workers.
Second, they found that demographic changes can be a big worry, with experts noting that by 2050, those of retirement age will make up more than a quarter of the population, while the working-age population will decline to just 55,1 percent of the total. “This will not only have a negative impact on pensions, but also on economic performance and prosperity," BearingPoint wrote.
Other reasons why multinational firms avoid Switzerland
Other negative factors noted by the study include:
- The elimination of low and variable business taxation thanks to the approval of the OECD Minimum Tax
- Energy security
- Lack of new innovation and new locations that are known to specialise in certain fields - like the one for pharmaceuticals in Basel
- The strength of the Swiss franc - which makes it less profitable to export goods abroad
- Lack of flexibility when it comes to issuing non-EU citizens with residence permits
- Switzerland’s tense relationship with the European Union
However, with the Swiss economy expected to grow, unemployment remaining low and the country set to fare better than its neighbours when it comes to inflation, many within the Swiss media have questioned the report’s significance. In response, BearingPoint said, according to Watson, that “if a frog is thrown into hot water, it jumps out. But if the water keeps getting warmer, it won't realise - and will die in the heat.”