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Swiss Industry Still Squeezed by Currency Shock
Swiss Industry Still Squeezed by Currency Shock

Swiss Industry Still Squeezed by Currency Shock

Swiss Industry Still Squeezed by Currency Shock

Two years after the Swiss franc shock brought Switzerland to the brink of recession, Roland Goethe is still fighting for the future of the sheet metal company his grandfather set up 86 years ago.
Goethe AG is one of many manufacturers coping with the aftermath of the Swiss National Bank’s decision in January 2015 to scrap a long-standing limit on the franc against the euro, Reuters reported.
The decision rocked currency markets and sent the franc rocketing against the euro, the currency of Switzerland’s main export market. Swiss economic growth slowed to 0.8% in 2015, its lowest since the financial crisis year of 2009.
While Switzerland’s overall economy has in some parts started to recover, many small and mid-sized manufacturers are still struggling with falling sales and profit margins.
“We’ve been battling the strong franc for years,” said Goethe, whose company makes metal components for air conditioning units, lighting installations and machine tools.
“But it was really a shock when it went to 1-1 versus the euro last year. We can struggle through at the moment ... but the situation is bitterly difficult.”
The strong franc not only hurts companies now but also reduces their ability to invest in technology to improve competitiveness.
“We are not earning enough to invest in the future,” Goethe added. “Trends like digitalization, robotics, intelligent manufacturing are passing us by nearly untouched.”
Swiss companies have lost sales as customers chose to buy products from the cheaper eurozone, while some have shifted operations abroad.
Margins tumbled when they cut prices to remain competitive, while the franc’s rise has meant they earn less in francs from euro-denominated sales.
Goethe’s sales fell by a fifth last year as it cut prices to limit lost orders, while its profit margin has shriveled to 3%.
“This year hasn’t improved,” said Goethe. “If it stays like this, there will be major problems for not just us, but for many companies across Switzerland.”
A study by industry association SwissMechanic revealed half of the companies surveyed said earnings were unsatisfactory, while a third said they were not making enough sales.
Swissmem, another trade association, reported that sales in the first nine months of 2016 were down 3.4% from last year’s already low figures.

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