SMEs face survival of fittest test

SMEs could face steep times ahead, say experts Keystone

Small businesses heard reassuring words about easing bureaucracy from the economics minister on Friday, but they face tougher challenges from competition.

Addressing bosses of small and medium sized enterprises (SMEs) in St Gallen, Joseph Deiss promised that by January he would come up with ideas about how to free these firms from the “jungle” of bureaucracy.

Also at the meeting was the economics editor Beat Kappeler. In an interview beforehand with swissinfo, he said Swiss SMEs are in a relatively healthy position compared with those in some other countries, but they must adapt to become more competitive if they are to survive.

Traditional small and medium sized businesses in the fields of construction and healthcare will find life tougher with the opening of Swiss borders to more European Union countries, according to Kappeler.

But he predicts a boom for strategic networks of independent professionals such as journalists, lawyers, translators and consultants.

“I predict a new phenomena of small independents which collaborate on short-term projects that they have in common,” he told swissinfo.

“This type of flexible networking will come to dominate the sector in place of the traditional SMEs.

Productivity

“People will still need plumbers and joiners to construct and maintain things. But they will struggle to grow because these markets are not expanding, productivity is not increasing and these businesses will not earn as much in future.”

Businesses with up to 250 employees represent 99.7 per cent of Switzerland’s 300,000 companies and account for more than two thirds of jobs.

An Ernst & Young study last year found that nine out of ten Swiss companies are family run.

But there are too many inefficient SMEs in Switzerland, according to Professor Franz Jaeger, who heads St Gallen University’s department of economic policy.

“There are too many small businesses in Switzerland at the moment. It would be better to have fewer companies that are more efficient,” he told swissinfo.

“It is important for a company to be efficient from the very beginning.”

Competition

Jaeger believes Swiss SMEs should start working together more closely and become more international in their outlook to keep up with increased competition in Europe.

“I am convinced that SME’s should try to orientate themselves outside of Switzerland,” he said. “Companies that are active over our borders will have the best prospects in future.

“They must also find a way of cooperating together while being competitive at the same time. Teamwork and competition are the two most important things for SMEs.”

Red tape

Both Kappeler and Jaeger agree that the biggest frustration for Swiss SMEs is the amount of regulations holding them back. Firms have to wade through thousands of pages of documents to complete their tax returns and often have to employ accountants to wade through the technical detail.

“The Swiss always want to do things perfectly – and that includes their tax forms. Because we are such sticklers for detail, it takes a lot of time to complete the administrative side of running a business,” Kappeler said.

“My father ran an independent joinery business and I remember the turmoil he went through dealing with the paperwork 45 years ago. Things have got much worse since then.”

swissinfo, Matthew Allen

Key facts

Small and medium sized enterprises (SMEs) employ up to 250 employees
SMEs account for 99.7 per cent of Switzerland’s 307,000 companies and 66.8 per cent of the workforce
In 1998 the economics ministry set up a task force to provide support for SMEs