• Reto Benz, Partner |

Swiss family businesses focusing on innovation and recruitment

The latest issue of the European Family Business Barometer, a joint annual publication by European Family Businesses and KPMG, reveals a promising development for family businesses in Switzerland: Half of the survey’s respondents felt either positive or very positive about the next twelve months.

European family-run businesses are confident about the future but must become more agile, push innovations and attract top talent to remain competitive and continue to grow. These are the key insights revealed by the newest European Family Business Barometer, which is based on the responses from more than 1,500 family businesses from 26 European countries. 13 family-run businesses from Switzerland also participated in this year’s survey and provided additional insights on hot topics such as politics, digitalization and taxes.

Pressing business challenges and political instability

The Swiss results of the Europe-wide survey show that SMEs are confident about 2019 and experienced promising growth over the course of the past year: 46 percent of those surveyed confirmed that they had boosted their sales in the last year, while 30 percent of the companies reported that their sales had remained steady over that same period. The overall study revealed that three quarters of European family businesses felt confident or very confident about the prospects for their family business over the next year.

At the same time, however, family businesses are faced with numerous challenges. The biggest challenges for family businesses in Switzerland are the war for talent, high non-wage labor costs, increased competition and declining profitability.

Despite Brexit, greater protectionism and controversial trade negotiations taking place around the globe, Swiss SMEs did not indicate political uncertainty as being one of their biggest challenges. Nevertheless, 54 percent of the Swiss companies named the unstable market environment in Europe, the UK, Asia and North and South America as one of their biggest risks. 23 percent consider regulatory overreach and excessively high administrative expenses among their biggest business risks.

Export-oriented companies are paying special attention to the relationship between Switzerland and the EU, protectionist tendencies in the US and general geopolitical uncertainties. Many of Switzerland’s traditional trading partners have become more unpredictable: Germany was left without a government for an extended period of time, Great Britain is very possibly on the verge of a “hard” Brexit and both France and Italy are caught in a reform deadlock.

Big investments in technology, innovation and new workers

Of the companies surveyed in Switzerland, 38 percent are planning to expand and diversify their products in order to promote future growth. Nearly half are planning investments in internationalization, while 85 percent of the Swiss respondents (Europe: 86 percent) are investing in their core business. 92 percent of those surveyed are making investments in innovation and technology (Europe: 83 percent), whereas 77 percent are investing in recruitment and training (Europe: 81 percent).

The biggest digitalization-related challenge cited by 61 percent of the Swiss family businesses is adapting their business models. However, in an age of increasing digitalization and technology-driven markets, they too see the need to cultivate a new skill set among their employees and executive management. One way of acquiring these new skills is by hiring new staff. In this context, 46 percent of Swiss businesses increased their workforce over the past year.

All things considered, these companies feel that digitalization offers huge business opportunities. However, it also forces companies to rethink their business models, poses quite substantial risks as a result of cyber-crime and requires that additional efforts be made in the area of data protection.

Ongoing legal uncertainty due to pending tax reform

Regulations place an enormous burden on the companies surveyed and make Switzerland, already quite costly as a business location, even more expensive. Another topic troubling Swiss companies is legal uncertainty, with one example being the tax reform, which is still pending. Then there is the ongoing shortage of skilled labor, which poses a further big challenge.

On this topic, 54 percent of Swiss companies have stated that one of their top three expectations of politicians and regulators is the resolution of an effective corporate tax reform. The other two were safeguarding the dual education system to guarantee the availability of qualified workers (23 percent), followed by possible tax relief in the areas of wealth and inheritance tax (15 percent).

For the complete European Family Business Barometer with detailed results from KPMG’s survey, click here.

Do you agree with the findings of the European Family Business Barometer?

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