Swiss firms seek best hand in Brexit poker game

London is one of Europe's most powerful centres of business and finance. Keystone

The numbers are clear: with CHF11.7 billion ($11.8 billion) in exports, some CHF80 billion of investments and 194,000 employees, Britain is one of the most important business locations for Swiss firms. What is less clear is how the picture will look if Britain leaves the European Union.

Half of the 185 companies, from both countries, recently surveyed by the British-Swiss Chamber of Commerce (BSCC) believe their economic outlook will be poorer if Britons vote to leave the EU on June 23. Only 13.5% think prospects will improve with a Brexit while just over a third say business will be unaffected.

But the anonymous comments attached to the survey (see below) highlight the confusion that surrounds the potential split. 

Comments from the BSCC survey

“Our ability to passport into the EU through London would need to be clarified in the renegotiation process and although no changes are expected for two years, there will be uncertainty and market volatility and consequently other options may become more attractive bases. However a decision to move from London would also be very complex in that two-year period.”

“My business is a Swiss SARL so I am assuming that business will not be directly affected if the UK leaves the EU.”

“I am running a Swiss SARL as a ‘frontalier’. It is altogether possible that if Britain leaves the EU, this will no longer be possible (t has only been possible since 2004 with the free movement of people bilaterals) and I will have to shut down my company. This will benefit precisely no-one. Already, I will make no additional investment in the period leading up to the referendum. In short, this is only bad for smaller British business.”

“My business is strongly focused on the UK and I am very concerned about the immediate, medium and long term consequences of a potential vote for the UK to leave the EU,” states another firm. “I fear that Brexit will present insurmountable challenges for the country and will significantly impact upon its relative attractiveness.”

“Being a European bank, if Britain leaves the EU, we will have to adapt our set up and probably leave many businesses currently run out of London. Overall it will impact costs and changes, so it will be both negative for our firm and negative for Britain as we will have to lay-off many employees.”

The fact is, companies in both countries are frantically trying to work out which way the wind will blow if Britain chooses the Swiss route to EU relations.

Such forthright comments are made under the cover of anonymity. In Switzerland, bosses are reluctant to break silence for fear of being accused of interfering in foreign politics, angering shareholders or simply because they have not formed a clear enough picture of all possible eventualities.

The few executives who have been enticed into speaking out on Brexit also give mixed opinions. “Every company would be forced to re-evaluate the implications of investing in the UK,” Nestlé chairman Peter Brabeck told Sky News in January.

But Sergio Ermotti, chief executive of UBS bank that employs 5,500 staff in London, gave a more optimistic assessment, albeit couched in caution. “I expect that we would keep a strong presence but that depends on a lot of factors which today are not yet clear,” he told Germany’s Süddeutsche Zeitung earlier this month.

Lobby groups

The consensus opinion is that it would take Britain two years to prise itself free from the EU. And then it would have to renegotiate relations with the EU and the rest of the world as an independent entity. That has resulted in a lot of question marks concerning the potential future lay of the land.

This is reflected in the contrasting stances of Swiss business lobby groups. “There will be no sudden shock or catastrophe if Britain leaves the EU,” Jan Atteslander of the Swiss Business Federation (economiesuisse) told swissinfo.ch. “The world will still be the same on June 24. What will be different is a high degree of uncertainty regarding the future of the economic integration in Europe of the British economy.”

Furthermore, Atteslander believes that the markets have already priced a potential Brexit into currency exchange rates. In other words, because many investors have already hedged their currency bets in light of a possible split, the pound and euro will not sink too drastically against the franc unless the markets are hit with unexpected news regarding Brexit.

However, Atteslander also thinks that companies will factor in the current economic uncertainty when deciding how much money to invest in Britain in the short-term.

Currency risks

Swissmem, the lobby group for electrical engineering, metals, fine tools and machine building firms, has a more pessimistic stance. Its member firms ship 4% of their goods to Britain.

“In the short-term, a Brexit would increase uncertainty in the EU,” Swissmem said in a written statement to swissinfo.ch. “This could have consequences on the franc-euro exchange rates. We would assume an upward pressure on the franc with subsequent [negative] consequences for the export industry.”

In the long-run, a Brexit would weaken the EU economically, in the view of Swissmem. This would spell further bad news for Swiss companies.

Switzerland Global Enterprise (s-ge), a government agency that facilitates foreign trade for Swiss firms, told swissinfo.ch that the companies it advises “in most cases don’t plan to react in terms of reviewing their strategy or similar until the situation has become more predictable.”

Swiss-British trade

Last year Swiss firms sent around CHF11.7 billion of exports to Britain and received some CHF6.6 billion of imported goods (without jewels or precious metals). That makes Britain the fifth largest receiver of Swiss goods and the eighth largest provider of imports to Switzerland.

If precious metals and jewellery are included to the statistics, Britain is the second largest supplier of goods to Switzerland.

Switzerland’s record of investing in Britain is even more impressive. At CHF78.7 billion (2013), Britain is the third largest beneficiary of direct foreign investments (buildings and machinery) by Swiss companies. At the end of 2013, Swiss firms employed 193,700 people in Britain – the fourth largest concentration of Swiss paid jobs abroad.

By the end of 2013 British firms had invested an accumulated CHF21.3 billion in Switzerland, creating 26,800 jobs. HSBC, Vodafone, BP and Unilever have the biggest Swiss presence of all British firms, according to the Swiss State Secretariat for Economic Affairs (Seco).